From January 1 through June 30, 63 companies made their market debut, posting an average loss of 8 percent on their initial share price offer, according to Renaissance Capital, which tracks IPOs. This total almost eclipses the total from all of last year. Good news, right?
A closer look indicates a few sectors that seem open for business, at least as far as Wall Street is concerned, but medical technology has not yet found its stride in this slowly recovering new equities marketplace. Scanning the landscape does produce a few notable exceptions, however, that have either managed to pull off a new offering or have simply undergone some fundamental change that may warrant a fresh look by investors.
On the IPO front both Plymouth, MN-based AGA Medical Corporation (Nasdaq: AGAM, http://www.amplatzer.com) and Summit, NJ-based CorMedix (Amex:CRMD, http://www.cormedix.com) have managed to launch deals in the first half. AGA Medical, a medical device manufacturer that markets technologies that treat structural heart defects and abnormal blood vessels, has gotten off to a strong, if not spectacular start. While the company went public on the strength of healthy revenues and a profitable P&L, the stock seems to be performing with the rest of the segment and succumbing somewhat to gravity. That said, they posted solid fiscal Q1 results and have picked up a good amount of research coverage from both regional and national I-banks.
CorMedix, on the other hand, began its public life with a small valuation that has only gotten smaller. The company makes therapeutic products that prevent and treat cardiorenal disease – a truly underserved market – and their technology looks very interesting http://seekingalpha.com/article/212147-cormedix-getting-to-the-core-of-cardiorenal-disease. That said, this IPO market is no place for the weak of heart or the speculative…..We are all rooting for CorMedix and will watch its progress as it climbs uphill in this market.
On the diagnostic side, we have seen lots of IPO threats and very little action of late. One recent exception was the sneaking out of London-based GenMark Diagnostics, Inc. (NASDAQ: GNMK, http://www.osmetech.co.uk), a provider of automated, multiplex molecular diagnostic testing systems. We were unaware that the company had moved from London’s AIM to Nasdaq until we were informed by GenMark board member and former client, Kevin O’Boyle, who most recently ended a seriously successful run as CFO at San Diego, CA-based NuVasive, Inc. (Nasdaq: NUVA, http://www.nuvasive.com) It seems that while other diagnostic tools companies such as Carlsbad, CA-based AutoGenomics (www.autogenomics.com) have been threatening for years to go public, the GenMark folks beat them to the punch. Molecular diagnostics, biomarkers and lab automation are not as hot as they were 12 months ago from a valuation standpoint, but it is still among the best segments in medtech and GNMK looks to have good upside if the world tunes in and they execute.
Finally, while not an IPO, it is worth noting a relatively high profile new start at a company that has, to date, underperformed on its promise, despite great potential. Mountain View, CA-based Hansen Medical (Nasdaq: HNSN, http://www.hansenmedical.com), which pioneered flexible robotic catheter systems for a variety of surgical procedures, concluded a long CEO searh last month by landing Bruce Barclay. Barclay comes off a successful run as CEO at Eden Prarie, MN-based SurModics (Nasdaq: SRDX, http://www.surmodics.com) where he ably executed on a complex business model and weathered some fundamental changes in the marketplace – positioning that company well for future growth. A very unscientific opinion poll of both institutions and analysts in the space indicate that Barclay’s joining Hansen will at least force a second look at the company and may mark a turnaround for valuations that have moved generally and steadily downward for the past three years.
A few IPOs, a few management changes – new life in the small medtech segment? We will see. Much of what happens will depend on the performance of the overall market and specifically among these pioneers over the next few months. Let’s hope……