Flurry of Medical Device IPOS Drive High Valuations
March 12, 2014
What do Biomet, Lombard Medical, Trivascular, Lumenis have in common. These companies are  filing IPO.
In January of 2014 we saw investment bankers starting to show interest in pre-revenue and revenue generating  medical device companies exploring IPO opportunity.
Medical device companies have always been sitting on the side lines when it comes to filing IPO, many companies did not use IPO as a source of exit or growth opportunity. Typically, these medical device companies would get acquired by a large strategic players.

More IB are realizing that the medical device sector has a very predictable regulatory path and faster commercialization capabilities than biotech and pharma sector. Medical device market in emerging countries is expanding rapidly. Investors appreciate that the exits in the device sector may not be very large but more predictable and quick. Investors seeing to make a quick buck will follow medical devices, those wanting to wait a decade for a payoff will be pro-biotech.

Today, the momentum of pre-revenue medical device IPO is growing. Sectors that are very hot are obesity , diabetes, sleep apnea, ENT, orthopedics and low cost spine surgery options.

Medical Device Laser Company Lumenis Plans for a $100M IPO

Medical Device Laser Company Lumenis Plans for a $100M IPO

March 8, 2014

Israel's  medical device company Lumenis is one of of many medical device companies to pursue the public markets and is moving ahead with its U.S. IPO plans.

The maker of minimally invasive medical lasers released further details in a recent regulatory filing, noting that it wants to sell 6.3 million shares and raise approximately $100 million.

Lumenis, which also has operations in San Jose, CA, said it anticipates a share price between $15 and $17, and will trade on the Nasdaq under the symbol, "LMNS." The company filed initial IPO plans with the U.S. Securities and Exchange Commission in December.

UK Based Med Device-Diagnostic files IPO: Quotient focuses on Blood Transfusion Diagnostics.

UK Based Med Device-Diagnostic files IPO:  Quotient focuses on Blood Transfusion Diagnostics.
March 8, 2014
Quotient, a U.K. focused on blood transfusion diagnostics, unveiled plans for an initial public offering that would raise as much as $75 million. The move continues a steady trickle of IPO movement among testing companies that began late last fall.
Share pricing and other details aren't out yet, but the company said it would rely on UBS Securities, Cowen & Company and Robert W. Baird & Co. to serve as joint bookrunners for the deal. Plans call for trading on Nasdaq, using the symbol "QTNT," according to the S-1 filing.

Medical Device Maker Biomet files for an IPO

Medical Device Maker Biomet files for an IPO

March 7, 2014

Biomet, a maker of medical devices based in Warsaw, IN, has reportedly filed with U.S. regulators for an IPO nominally valued at $100 million.

Reuters reported the IPO filing, which comes 7 years after the maker of orthopedics was taken private in an $11.4 billion leveraged buyout deal. Goldman Sachs Group, Blackstone Group, KKR & Co. and TPG Capital own 97% of Biomet, according to the report. As of Nov. 30, Biomet still carried $5.9 billion in debt, following that transaction, according to The Wall Street Journal.

The Journal reported in February (sub. req.) that Biomet was talking to bankers about raising up to $1 billion in an IPO. The $100 million figure reported by Reuters and others is a placeholder used to calculate registration fees. The eventual IPO fundraise is likely to be more.

Last year, Biomet was the subject of M&A takeover rumors, with some speculating the company would pursue an IPO as possible leverage in buyout talks. 

Biomet also briefly considered spinning off its dental unit. Then it appeared to head in the opposite direction, diversifying with the October acquisition of Colorado spinal startup Lanx for $150 million. California is hub for new spine device companies.  Acquisition of Lanx has triggered the spine transactions again. Large companies are now looking a low cost spine devices which  have replaced the need for minimally invasive spine surgery. Experts say, surgical outcomes between MIS and open repair are not that different, but the cost is 4 to 6 times conventional treatment.  The outside US market is booming for spine technology and makers of orthopedic companies are looking to purchase spine companies in the US with good technology pre revenue and even pre-FDA.

By January, talk of divestiture appeared to have cooled. The maker of dental implants and hip and knee replacements reported its second-quarter earnings: $4.9 million in profit on $825.7 million in sales--a 4.5% boost to its top line over the year-ago period.

BofA Merrill Lynch, Goldman Sachs and J.P. Morgan are lead underwriters on Biomet's offering, according to Reuters

Understanding the SMART DEALS: Sale of Allergan’s lap band business in 2013

Understanding the SMART DEALS: Sale of Allergan’s lap band business in 2013 to Apollo Endosurgery

Apollo Endosurgery paid approx $110 M for the lap-band. 
The purpose of this exercise is to dig deep into the deal and teach a lesson to medical device investors and deal makers how to "lose and win at the same time". I think this is a great opportunity to evaluate the purchase and sale of the lap band business. 
To make this deal lucid we are going to use approximate numbers. Also, keep in mind that this is a learning tool or exercise for all the medical device entrepreneurs.
This exercise is not to evaluate the merits of lap band. 
This is not an assessment of the stock or the performance of the company. I do not own any stock of Allergan and do not have any financial interest in the company. Again, this is a study exercise.

Let's go back approximately 7 yrs ago and look at the purchase of the lap band from Santa Barbara based company called Inamed in late Dec 2005 or early 2006. Allergan purchased Inamed for approximately $3 B. The announcement came in Dec 2005 when the stock was  trading between $99 to $104

In Jan of 2006 the stock was trading around $114 to $115. Avg volume was 2.5 M stock and an outstanding stock of approx 300M. If you look at the stock price difference from Dec to Feb which is approximately a gain of $15. Simply multiply $15 X300 M = $4.5 B gain!

Fast forward, year 2013 Allergan announces to sell lap-band and aesthetic business end of Oct 2013. Before the announcement Stock was trading at $92-$95 in the next 50 days the stock jumps to approx $114. Assuming the outstanding stock of 300M. The math turns out to be $20 X300 Million = $6B. Similar to the transaction in 2006 making this a ‘ultra smart deal’.  

It appears that Allergan was not able to see the growth in the band business because they had only one product and towards the tail end of its life cycle. Lap band had seen $250 Million + revenues year after year but could not keep up with the botox and the latisse brands. Sale of lapband was the best decision. But look how much they made of the deal of just purchasing and selling the band business. Plus it sold band for 6 yrs with great revenues The top year was $350 M.
Obesity technologies are super hot. Now, we have to see how Apollo can leverage the lap band business, the fact is Apollo might need some next gen technologies to enhance the lap band business. 

Strategic players including drug companies in the US  and outside US are considering  to be the medical device weight loss business. 

The timing the weight loss technology sector cannot be better. AMA (American Medical Association) announced obesity as a disease in 2013 just after Allergan had decided to get out of the weight loss business. Insurance companies and payers are exploring the cost benefit and considering to cover obesity treatment, regulators worldwide including FDA are fast-tracking the approvals, patients are amenable to new treatments and are ready to take surgical risks in order to reduce the long term disability,  productivity and improve quality of life. 
The rates of obesity and diabetes has increased worldwide. Emerging countries like India, Brazil, China, Russia , Mexico, Argentina, Chile have seen unprecedented obesity rates. India and Mexico has seen 10% and 30% growth in obesity rates in adults and children. Countries like Australia, NZ, Canada, UK, Germany, Italy, Saudi, UAE and Kuwait are seeing obesity in epidemic proportions translating the medical device market to exceed over $139.5 Billion by 2017 according to Medical Device DiagnosticIndustry (MDDI).

In 2014, The life science sector may see a surge of institutional investments in medical technologies treating obesity and diabetes. The upward trend of IPOs  will continue, we may see several pre-revenue companies filing for IPO in this sector with high valuations. 2014 -2020, we may continue to see more smart transactions in the life science sector. Please post your comments and limit your thoughts related to this transaction or new technologies that might be the next gen technologies. 


The information in the blog is my study exercise. These calculations are based on my understanding of the deal and my own opinion. This blog is not an investment advice or research

Flurry of Med Device IPO Activity on the Heels of the J.P. Morgan Healthcare Conference 2014

Life science investing in 2014: VC investment to gain momentum

Kara Reed

Jan 24, 2014

Private Investors will continue to take advantage of investment opportunity. 

As FDA shows signs of reform. IPO boom will continue in the biotech sector but drift to  Medical Device sector as the regulatory and revenue   seems to be more predictable

After sitting on the sidelines many VCs are jumping back. JP Morgan saw a very enthusiastic investor sentiment. 

It was the best in a decade said Mr David Pyott at a CHI biomedical /PWC report meeting in Newport Beach, Ca. Among the attendees were Mr David Gallager, CEO of CHI, Peter Claude of PWC, HJ Paik of PWC, Terence Green from Childrens Hospital, Dennis Drislane from Belhealth Investment Partners, Paul Stein from Onciomed, Inc.

JPMorgan meeting was all about "will the Biotech IPO boom continue" Answer is "Yes with a twist"

The IPO boom is going to continue with a twist that now more medical device companies will be part of the IPO boom.

It is fairly easy to predict the time for a medical device approval than a biotech said one expert. Moreover, there are new therapuetic areas that have not been touched like diabetes, Obesity, sleep apnea and womens health. Morgan Lewis reception saw over 500 attendees and the conversations were very positive. 2014 will see companies getting funded, VCs raising more capital, VC taking more risks, Med devices going public. This trend has already started in Israel and Australia and slowly steaming up in US.

This year JPM saw over 10,000 attendees in and around the Union Square in San Francisco. California life science sector is very heavy on devices and biotech. California needs more incentives and attention from Gov Brown or these companies are being solicited by out of state government incentives to move operations to take the company and innovation out the state or even out of the country. Several companies have moved operations to Boston for better tax incentives,  property gain, more state government funding and grants to assist with R&D. 

China story has weakened as US life science sector is booming. More private investors are jumping in before the VCs correct their mistakes and reinvest in the early stage companies. 

"The ROIs are going to be back like good old days" said an investment expert attending Morgan Lewis cocktail reception at JPM. "Early stage companies tackling unmet needs like diabetes or obesity may make 20-30X if they invest in the right company and right technology. Large companies are waiting to enter this space and the appetite for a medical device in this space is growing. There is going to be a frenzy to buy companies in this Diabesity sector. Investor timing is everything".  he said

 Amgen had a large presence at the JW Marriott. Trout group had several activities at the JPM and their reception was well attended. 

Soffinova venture saw a large crowd for their reception. Hilton Hotel lobby was full of entrepreneurs and investors form around the world. The St Francis hotel lobby was full as usual and saw deals happening in the lobby even press was present at the Hilton to cover some private deals. 

Investors from China, India, Brazil and Australia were engaged in investing in early stage medical device companies at a special event hosted by medtech group at the Marriott on Market St.

Posted by Karen Reed

All opinions expressed are those of the author. The Blog  is an independent and neutral platform dedicated to generating debate around the key topics that shape global, regional and industry agendas.

 

 

Big Brains in Davos World Economic Forum Stumped by Obesity. 

The Need for New Technologies to Treat DIABESITY (Diabetes & Obesity)

Jan 23rd, 2014

MenloPark, Ca

Karen Reed

Obesity is the fastest-growing chronic disease, killing 2.8 million adults every year. With 1.4 billion overweight adults, we live in a world where unhealthy food, labour-saving devices, motorized transport and sedentary work are prevalent. Fast food sales are also on the rise, blurring the boundaries between meals and snacks.

  American Medical Association took a great step to declare obesity as a disease.  Next step is to support researchers and entities focused on treating obesity. We have seen some progress with pharmaceutical industry, but we need more less invasive medical intervention technologies  like the lap band and other  technologies that can help patients fight obesity and reduce the cost , morbidity and mortality burden.
Medical Schools and Universities need to increase programs for bariatric and obesity medicine and surgery. There are over 30 Million Super Obese individuals who suffer from obesity and have one or more chronic conditions like Diabetes.
Weight loss surgery cost approximately $20,000 to $35,000. Drug treatment cost approximately $8000/yr for the drugs to treat up to 10% excess weight.
Clearly, less invasive surgery seems to be the more attractive treatment for obesity. The Stampede trial conducted by Cleveland Clinic suggested that the weight loss surgery helps resolve diabetes.
The fight against obesity is spreading worldwide.
Emerging countries like India has gone from undernourished to obesity in the last decade. A sobering thought, if all the people acted responsibly and started reversing the trend it will take 3 decades to get back to the 1990 level of obesity. 

The facts are staggering:

• In 2008, more than 1.4 billion adults over the age of 20 were overweight
• 30% of Mexican adults are obese
• 65% of people live in countries were obesity kills more than undernourishment does

In 2008, medical costs associated with obesity in the US were estimated at US$ 147 billion
 Posted by Karen Reed
All opinions expressed are those of the author. The Blog  is an independent and neutral platform dedicated to generating debate around the key topics that shape global, regional and industry agendas.