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Medtech IPOs: The Comeback Continues

Following a complete absence from the initial public offering (IPO) market in 2003, the medtech sector made a strong comeback in 2004, with 18 companies going public (see Table I). Showing considerable sector momentum during the period, the number of companies issuing IPOs in the second half of 2004 was double that of the first six months.

Battenberg
Table I: click to enlarge

According to Renaissance Capital Inc. (Greenwich, CT), IPOs in all industries increased more than threefold in 2004, with 216 issues versus only 68 in the previous year. Proceeds generated by IPOs in 2004 were $43 billion compared with $15 billion a year earlier. However, the size of the average deal in 2004 decreased by 11.6%—from $224 million in 2003 to $198 million in 2004.

In the medtech sector, gross proceeds from the 18 IPOs of 2004 are estimated to be $1.27 billion. Deals ranged from $12.6 million to $240 million, with an average value of $70.7 million.

While medtech IPOs accounted for just 7% of all firms going public in 2004, two sector companies made the top-10 list of performers. Syneron Medical Ltd. (Yoqneam, Israel) and Kinetic Concepts Inc. (San Antonio) showed year-end gains of 155% and 154% respectively, over their issue price. In addition, two other companies— AngioDynamics Inc. (Queensbury, NY) and Foxhollow Technologies Inc. (Redwood City, CA)—have seen their share price double since their IPO (see Table II).

Battenberg
Table II: click to enlarge

Since their initial issue, 13 of the 18 medtech IPOs have gained share value, while five have declined. Using recent stock market data, performance versus initial pricing ranged from a 32.6% loss to a 147% gain. Overall, the 18 medtech IPOs have shown an average increase in share value of more than 29%.

On the whole, 2004 was the best year for medtech IPOs since 1996, when 47 companies went public. That crop generally performed poorly and gave rise to the perception that medtech IPOs ‘fizzle after issue.’ By contrast, the current group is showing signs of sustainable performance. And there’s apparently more on the way, with several medtech companies having already filed for IPOs with the Securities and Exchange Commission (SEC). Those firms are expected to issue shares in the first quarter of 2005.

© 2005 Canon Communications LLC

 

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