Originally Published MX September/October 2004
BUSINESS NEWS
Medical Device IPOs: Year of the Comeback?After a complete absence from the public equity markets in 2003, the medtech industry is showing signs that the initial public offering (IPO) may be reemerging as a viable tool for capital formation. Renaissance Capital (Greenwich, CT) reports that six medtech companies issued IPOs during the first six months of this year (see Table I).
|
Company
|
Location
|
Ticker
|
Web
Site
|
Products
|
2003
Revenues
($ millions) |
Employees
(no.) |
| AngioDynamics Inc. | Queensbury, NY | NASDAQ: ANGO |
www.angiodynamics.com | Medical devices used in minimally invasive, image-guided procedures to treat peripheral vascualr disease. |
46.2
|
218
|
| Animas Corp. | West Chester, PA | NASDAQ: PUMP |
www.animascorp.com | External insulin pumps. |
31.6
|
290
|
| Cutera Inc. | Brisbane, CA | NASDAQ: CUTR |
www.cutera.com | Laser-based products for aesthetic removal of hair, wrinkles, and leg and facial veins. |
44.1
|
112
|
| Digirad Corp. | Poway, CA | NASDAQ: DRAD |
www.digirad.com | Solid-state medical imaging products for the detection of cardiovascular disease. |
59.1
|
316
|
| Kinetic Concepts Inc. | San Antonio, TX | NYSE: KCI |
www.kci1.com | Advanced wound care and therapeutic surface products. |
821.7
|
4096
|
| NuVasive Inc. | San Diego, CA | NASDAQ: NUVA |
www.nuvasive.com | Surgical products for the treatement of spine disorders. |
25.8
|
83
|
| Table I. Company information for medical device firms placing initial public offerings during the first six months of 2004. Data: Renaissance Capital and company reports. | ||||||
Continuing the trend since the midpoint of the year, three additional medtech companies have launched their anticipated IPOs. NeuroMetrix Inc. (Waltham, MA) went public on July 22 (NASDAQ: NURO) with an opening price of $8.00, which had risen to $8.08 at the end of August. Syneron Medical Ltd. (Yoqneam, Israel), began trading on August 9 (NASDAQ: ELOS) with an opening price of $12, which fell back slightly to $11.90 at the end of August. Stereotaxis (St. Louis) began trading on August 12 (NASDAQ: STXS) with an opening price of $8, which had risen to $9.14 by the end of the month.
Four additional companies have filed and are expected to begin trading soon, including: CABG Medical Inc. (Minneapolis), Empi Inc. (St. Paul, MN), IntraLase (Irvine, CA), Nephros Inc. (New York City), and VNUS Medical Technologies Inc. (San Jose, CA).
Since the current medtech IPOs have only been on the market for a short period of time, it's too early to evaluate their performance. However, one of the newly public companies, Kinetic Concepts Inc. (San Antonio, TX), has done exceptionally well, posting a 66% gain in share price since its initial issue at the end of February (see Table II).
|
Company
|
Offering
Date
|
Offering
Price
|
Shares
(millions) |
Underwriters
|
Net
Proceeds
|
Recent
Price
|
| AngioDynamics Inc. |
5/27/04
|
11.00
|
1.95
|
RBC Capital Markets; Adams Harkness |
N/A
|
12.54
|
| Animas Corp. |
5/20/04
|
15.00
|
4.89
|
Piper Jaffray; JP Morgan |
65.8
|
16.53
|
| Cutera Inc. |
3/31/04
|
14.00
|
3.53
|
Piper Jaffray; SG Cowen |
N/A
|
11.40
|
| Digirad Corp. |
6/10/04
|
12.00
|
5.5
|
Merrill Lynch |
59.7
|
9.15
|
| Kinetic Concepts Inc. |
2/24/04
|
30.00
|
18.0
|
Merrill Lynch |
74.9
|
49.77
|
| NuVasive Inc. |
5/13/04
|
11.00
|
6.5
|
Bank of America |
N/A
|
9.49
|
| Table II. Offering details for medical device firms placing initial public offerings during the first six months of 2004. Data: Renaissance Capital and company reports. | ||||||
In recent years, medtech IPOs have had a bumpy track record, leaving investors with the lingering perception that medtech companies are especially vulnerable to underperformance following issue. To explain such a perception, analysts usually point to the poor performance of the IPO class of 1996, when a record 47 medtech companies went public. Many of the companies launched that year eventually proved disappointing to investors. According to Merrill Lynch (New York City), the poor performance of that IPO class began the general decline in medtech IPO issues, which fell off to 13 in 1997 and have yet to reach that level again. Since then, the most the market has been able to muster was in 2000, when 10 medtech IPOs were launched.
But 2004 appears to be a whole new ball game. The overall IPO market is more than twice as active as it was last year, averaging 15 new issues per month compared with six per month in 2003. Considering the heightened activity level and current medtech filing pipeline, 2004 could prove to be the best year for medtech IPOs since the downturn began in 1996.
But of course the real measure of medtech's IPO class of 2004 will not be determined by how many are issued, but by how well they perform. Stay tuned.
Copyright ©2004 MX
