Medical Device Link.

BUSINESS NEWS

Perhaps 2007 wasn't quite a banner year for initial public offerings (IPOs) by medical technology companies. But after the dreadful start that the public markets have had in 2008, companies on the hunt for public funding may soon be looking at last year as 'the good old days.'

According to Renaissance Capital (Greenwich, CT), 13 medical device firms made the transition from privately held to publicly traded companies during 2007, compared with 11 in 2006 (see Table I). The 2007 deals generated $1.27 billion, an increase of 52% over the $832 million IPO yield of the prior year. Valuation of the 2007 medtech IPOs ranged from $21 million to $288 million, with a group average of $97.7 million.

Across all industries, 234 companies issued IPOs in 2007. That figure reportedly represents the greatest number of IPOs in a single year since 2000 and an 18% increase over the 2006 figure of 198. Proceeds from IPOs in 2007 were $54 billion, a 26% increase over the $43 billion generated in 2006. However, IPOs in 2007 failed to match the postlaunch performance of 2006 offerings, which produced increased value of 26%—twice the 13% returns generated by IPOs in 2007.

Taken as a group, the 2007 medical device IPOs have so far outperformed those of the general market. From their date of issue through early January 2008, the 13 medtech IPOs yielded an average return of 15.9%.

Ten additional medtech companies filed IPOs during 2007 but have not yet begun trading. They are Alma Lasers Ltd. (Caesarea, Israel), BG Medicine Inc. (Waltham, MA), Broncus Technologies Inc. (Mountain View, CA), Concentric Medical Inc. (Mountain View, CA), Emphasys Medical Inc. (Redwood City, CA), Eyeonics Inc. (Aliso Viejo, CA), Mako Surgical Inc. (Fort Lauderdale, FL), Transmedics Inc. (Andover, MA), Transoma Medical Inc. (St. Paul, MN), and XDx Inc. (Brisbane, CA).

Several of these 2007 inactive medtech IPO filings were announced months ago. Considering the current turmoil in the worldwide economy, companies that have announced their intention to go public but haven't yet launched their IPOs may join a growing group of companies that are already circling the stock exchange trading floors in a holding pattern. Meanwhile, five other medtech companies withdrew their IPO filings during 2007, including Amedica Corp. (Salt Lake City), Devax Inc. (Lake Forest, CA), Eyetel Imaging Inc. (Columbia, MD), Precision Therapeutics Inc. (Pittsburgh), and Reliant Technologies Inc. (Mountain View, CA).

Once the global economy settles down and begins its inevitable march toward recovery, the IPO will almost certainly regain its position as a viable vehicle for raising medtech capital. Nevertheless, many analysts believe that the IPO no longer has the cachet that it once enjoyed. In the era of Sarbanes-Oxley, medical product entrepreneurs no longer see going public as emblematic of a successful company—or, for that matter, a prime exit strategy.