The party’s not over exactly, but the booze is running out and somebody’s turned the music down. Last year 29 medical device companies listed on stock exchanges; in the first six months of 2019, just eight medtechs went public.
At least the sizes of the offerings were respectable. Last year’s total of $6.7bn was distorted by Siemens Healthineers’ vast Frankfurt listing – without that, the total raised was $1.6bn. The first half of 2019 has already seen a total of $1.3bn raised through IPOs, so the few that did feel able to go out met with a receptive audience.
Switzerland, Australia and Korea
Just like last year, the largest single deal is European. Swiss orthopaedics company Medacta Group stayed with its home exchange, raising SFr547m ($588m) in April in what was the Six Swiss’s first IPO of the year. The founding Siccardi family have retained control of the company with its free float amounting to about 30% of its shares.
Medacta, which makes implants for hips, knees and spines, among other applications, had revenues of around $307m last year, putting it in the top 15 orthopaedics companies.
|IPOs by year, 2014-19|
|Year||IPO count||Total raised ($m)||Average size ($m)|
|2016 (excluding Convatec)||11||406||36.9|
|2018 (excluding Healthineers)||28||1,594||56.9|
If Medacta is the winner in terms of float size Australian group Next Science, which makes polymer gels that are designed to disrupt the structure of bacterial biofilms in an effort to help reduce reliance on antibiotics, beats all when it comes to share price appreciation. Its stock rose 311% from its float in April to the end of June – but perhaps this is not the extraordinary achievement it first appears given that the company went out at a price of just one Australian dollar per share.
Indeed it is reassuring that these debutante companies are benefitting, overall, from the positive sentiment in the market that most of medtech has enjoyed so far this year (Mid cap device makers find rewards in cancer and diabetes, July 5, 2019). Five of the eight groups have seen their stock rise, and the increases are much more dramatic than the share price fall. Moreover, all but two of the companies managed to hit the values deal bankers had pitched.
|H1 2019's medtech IPOs|
|Date||Company||Amount raised ($m)||Offering price||Stock Exchange||Discount/ premium||Share price change to Jun 28|
|Apr 4||Medacta Group||588||SFr104||Six Swiss Exchange||8%||(23%)|
|Jun 27||Adaptive Biotechnologies||345||$20||Nasdaq||25%||142%|
|Apr 4||Silk Road Medical||120||$20||Nasdaq||25%||142%|
|Mar 7||Shockwave Medical||111||$17||Nasdaq||13%||236%|
|Feb 11||Sequana Medical||32||€8.50||Euronext||(3%)||(25%)|
|Apr 18||Next Science||25||A$1||Australian Securities Exchange||0%||311%|
|Feb 1||Innotherapy||8||KRW18000||Korea Exchange||(11%)||(37%)|
One of the exceptions here, Innotherapy, which had to take an 11% haircut to get its tiny offering away and still saw its value drop 37% to mid-year, is remarkable in another way.
The developer of bioadhesive surgical sealants is the only Korean float so far this year – remarkable considering seven companies went out on Korean exchanges in 2018 (Medtech IPOs rocketed just as stock markets faltered, January 22, 2019). This alone might count for the downturn in the number of flotations so far in 2019, though the US governmental shutdown that kicked the year off cannot have helped either.
Even so, half of the action, in terms of both number of deals and total cash raised, was outside the US. This is a huge difference from biopharma, where the IPO scene is still US-led, but par for the course in the medtech sector, where listings have been more or less evenly split between the US and non-US markets for the past three years.
For companies seeking growth capital, the IPO market is uncomfortably reminiscent of the VC situation. Those that can do a deal tend to succeed quite nicely – but the number of deals being done is falling.