Astounding success greets newly public device makers

2020 was a bountiful year for medtechs making their public debut, with one group, Inari Medical, more than quadrupling in value.

IPO

Medical device companies listing in 2020 raised a highly respectable total of $2.3bn, an impressive figure for what was a difficult year. Intriguingly, the action coincided with the height of the Covid-19 pandemic, though none of the companies going public was specifically involved with diagnosing or treating the disease. 

So keen were investors on healthcare stocks that not one of the 10 largest medtech IPOs needed to price at a discount, and some managed double-digit premiums. Moreover, all but one have enjoyed valuation growth since, with six of the top 10 more than doubling their market cap by the end of the year. 

Cutting the listings data by quarters shows a clear lull in offerings as 2019 turned into 2020. But after the first quarter of last year ended, just as it was becoming clear that Covid-19 had reached the West and was going to pose major problems, IPOs came roaring back. 

The graph below excludes IPOs that raised $1bn or more, to reflect the environment for younger groups in search of growth capital. 

Cancer testing was without doubt the hot area, and as with the biggest venture deals of 2020 liquid biopsy was prominent. The two Chinese groups that hit Nasdaq in June with $200m-plus IPOs, Genetron Holdings and Burning Rock Biotech, are both working on cancer blood tests. Burning Rock’s pan-cancer test is being evaluated in Predict, China’s first ever study in the setting of early detection in multiple cancer types. 

Genetron, which is developing HCCscreen, a liquid biopsy for liver cancer, priced its IPO 28% higher than its target range, and upsized its offering to boot. But its fortunes have faded since, and it is the only one of the top 10 cohort to have seen its share price slide. 

Of course, there were two liquid biopsy IPOs that got away. Archer DX and Grail had both filed to raise $100m – likely a placeholder figure, in Grail’s case at least – via flotations, but were headed off by Invitae and Illumina respectively. 

Top 10 medtech IPOs of 2020
Date Company Focus Amount raised ($m) Premium Share price change to Dec 31
Nov 21 Sotera Health General hospital and healthcare supply 1,233 7% 19%
Sep 16 Outset Medical Nephrology 278 17% 111%
Jun 19 Genetron Holdings In vitro diagnostics 256 28%  (13%)
Jun 12 Burning Rock Biotech In vitro diagnostics 223 14% 40%
Oct 2 Pulmonx Anaesthesia & respiratory 219 9% 263%
Aug 7 Acutus Medical Cardiology 183 6% 60%
Aug 21 Nano-X Imaging Diagnostic imaging 165 0% 154%
Oct 16 Eargo Ear, nose & throat 163 20% 149%
May 22 Inari Medical Cardiology 156 9% 359%
Sep 21 Implantica Gastroenterology; urology 152 0% 114%
All listings on Nasdaq, except Implantica on Nasdaq First North. Source: EvaluateMedTech & company websites.

Mega-floats are becoming an annual tradition in the device sphere. The select group that comprises Convatec, Siemens Healthineers and Smiledirectclub was expanded to include Sotera Health, whose $1.2bn offering in November went out at a modest premium. Stock in the group, which is active in the areas of sterilisation, lab testing and radioisotopes, has done acceptably since – though arguably somewhat disappointingly compared with its fellows. 

The poster child here is Inari Medical. The company has two FDA-cleared products designed to remove large emboli and thrombi from the peripheral vasculature, and managed to achieve profitability within a year of entering the market. On its first day on Nasdaq the stock closed up 124%, and has done remarkably well since. Inari’s market cap currently sits at $4.7bn. 

Medtech stocks were of course lifted by the market rally that followed the shock as lockdowns hit in late March. But the device sector seems to have done particularly well. 

But a note of caution ought to be struck for the future. IPOs tend to be regarded as financing events, and remain the second choice for medtech investors seeking an exit: takeout will always reign supreme. If the stock markets remain this bubbly, companies seeking a trade sale might have a hard time finding a buyer. 

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