Irhythm rocks the Nasdaq

2016 has been a quiet year for medtech IPOs, but no longer. There has been an appreciable uptick in Nasdaq listings in the second half of the year, and now the exchange has seen Irhythm Technologies get away to the tune of $107m – the biggest device IPO since Glaukos’s $108m offering in June 2015.

Whether this signals a fresh appetite for device makers on the part of public investors is anyone’s guess. They are certainly keen on Irhythm, at least: its shares closed at $26.05, up 53% from the listing price of $17 – itself a 21% increase from the initial filing range.

Irhythm sells a wearable, disposable heart monitor that records a patient’s heartbeat for two weeks to help detect arrhythmias sooner in the diagnostic pathway and allow changes to patient care to be made more swiftly than current practice. It is CE marked in Europe and cleared by the FDA. 

The Zio is a wireless adhesive patch worn on the patient’s chest after prescription by a doctor, and is thus distinct from watch-type technologies sold on a consumer basis, which have been the subject of recent accuracy concerns.

Best in class?

The Zio’s USP is, predictably, its software. The device analyses a patient’s data and sends their doctor summary reports under a service business model. In May 2015, analysts from Wells Fargo wrote that it “seems that Irhythm has surpassed the Holter monitor as the best-in-class monitor”. Irhythm puts the US market opportunity for its technology at $1.4bn, but 2015 sales were $36m.

The Zio has been used to monitor around half a million patients, Irhythm says, and it is reimbursed by government and private health insurers. This, and the implicit cost savings that come with earlier diagnosis, are doubtless part of what has made the company so appealing to shareholders. 

The previous medtech IPO record holder for 2016 was Nanthealth’s $91m offering. The diagnostics company, part of the nebulous Nantworks initiative, offers a test called GPS cancer, which is intended to permit the complete sequencing of patient and tumour DNA and RNA.

That offering, in May, was the first of this year’s six Nasdaq floats. The pace has picked up significantly, with five more Nasdaq IPOs since then.

Selected medtech IPOs of 2016
IPO Date Company Area Amount raised ($m) Price (native currency) Discount/ premium Exchange
March 18 Senseonics Diabetic care 45 $2.85 - NYSE
April 27 Volpara Solutions Diagnostic imaging 10 AUS$0.5 - Australian securities exchange
May 4 Osteonic Orthopedics 2 KRW500 - KOSDAQ
May 6 Nanthealth Healthcare IT; in vitro diagnostics 91 $14.00 0% Nasdaq
May 18 Pulse Biosciences Radiology 20 $4.00 - Nasdaq
May 18 Oncimmune In vitro diagnostics 16 £1.30 - London stock exchange
June 3 Sensus Healthcare Radiology 11 $5.50 0% Nasdaq
July 28 Tactile Medical Cardiology; physical medicine; wound management 41 $10.00 -33% Nasdaq
October 6 Obalon Therapeutics Gastroenterology 75 $15.00 0% Nasdaq
October 20 Irhythm Technologies Cardiology  107 $17.00 21% Nasdaq

But none has been as successful as Irhythm. Tactile Medical, which makes pneumatic compression devices to treat conditions like lymphoedema and venous ulcers, managed to raise $41m in July, but had to price the shares a third lower than the previously announced range, and the obesity device maker Obalon Therapeutic scored $75m this month but could not muster a premium.

Irhythm, by contrast, was the only company to price at a premium to its range, but also increased the size of its offering. It had initially intended to sell 5.35 million shares at $13-15, but this revised to nearly 6.3 million shares at $17.

Its venture backers, which include the corporate VC arms of St. Jude Medical and Novo Nordisk, will surely be delighted.

To contact the writer of this story email Elizabeth Cairns in London at elizabethc@epvantage.com or follow @LizEPVantage on Twitter

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