GI Dynamics (ASX:GID) has been the talk of the medical device industry lately.

The Lexington, Mass.-based obesity and Type II diabetes treatment company pulled off one of the summer’s funding coups, pocketing $86 million with an initial public offering on the Australian stock market. The IPO, the largest on the Australian Stock Exchange in 2011, netted the company enough capital to fund commercialization efforts for its EndoBarrier gastrointestinal sleeve Down Under and in the European Union, where it enjoys CE Mark approval.

The EndoBarrier is a plastic sleeve inserted endoscopically into the small intestine, where it slows the uptake of nutrients from food to induce weight loss and help control the symptoms of diabetes. It’s been approved for 12 months of treatment in the European Union and is also on the market in Chile, Germany, the United Kingdom and the Netherlands. The company has also received an investigational device exemption approval to commence a pilot trial of the EndoBarrier in the U.S.

Randle recently sat down with MassDevice to discuss the company’s IPO and more in one of his first interviews since he took GI Dynamics public.

MassDevice: We’re very interested in the thought process that led you to file an IPO in Australia. GI Dynamics has never seemed like a company that had trouble raising capital.

Stu Randle: You’re correct in that we’ve been quite successful raising cash in the past. As we contemplated our most recent financing, we looked at raising capital in the U.S. privately, with both strategic investors and financial investors. We looked at doing a public offering in the U.S. and that was basically not available. The only device companies that have been getting out recently are approaching $50 to $100 million in revenues and this was as of second quarter, so I’m not entirely sure the window isn’t closed for everybody.

It started last year when we had a conversation with Steve Osterle, the chief medical officer for Medtronic Inc. (NYSE:MDT), who is on our board. As were discussing our financing options, Steve said, ‘You guys should check out REVA Medical Inc., they’ve filed an IPO in Australia and it’s going very well.’ We kept an eye on that process. They successfully went public in December of last year. They introduced us to the bankers who took REVA out at the JP Morgan Conference in January and through this calendar year we continued to pursue multiple options in parallel, the Austalian IPO being one and private financing with investors and strategics being the other primary option.

What made the decision to go to Australia was the fact that we could raise a significant amount of capital that we expect will last us for a number of years, as opposed to doing a couple of private financings.

MassDevice: Does it eliminate any of the pressure on GI Dynamics that would come with a venture capital firm, or are there new pressures that arise from being public?

SR: I think what it does is provide us with the sufficient capital to do the commercial activity in a very slow, measured, methodical rate. We have always been blessed with good investors and significant ability to raise capital, but this allowing us to take a methodical approach from clinical trial use to commercial use. In Europe, we are trying to take care to pick the right facilities, the right surgeons, the right physicians in general and it can really go very slowly to make an easy transition from clinical trial utilization to commercial utilization.

MassDevice: Did you spend a lot of time looking at a company like HeartWare International Inc. (NSDQ:HTWR), which went public in Australia first?

SR: We spent a lot of time with the executives, investors and others from both HeartWare and REVA through this process.

MassDevice: What did they tell you about the pros and cons of this approach?

SR: There’s a fundamentally different investor mindset, which is the wonderful thing. That’s a big plus. The downside is you’ve got to go see your investors on a regular basis and it’s not just investors in Australia. The road show also included Hong Kong, Singapore and London. Between May and July we made two trips around the world, once in each direction, talking to investors.

MassDevice: What’s the company’s footprint in Australia?

SR: We just got approved for use in Australia and we’re about to begin commercial activity there. The EndoBarrier will be on the market there in the next few months.

MassDevice: HeartWare did eventually come back and go public in the U.S. Is this a model you’ll follow as well?

SR: It’s certainly an option we will continue to evaluate.

MassDevice: Do you feel that your investors were satisfied with the outcome?

SR: As a board, which included investors, we all believe this was the best alternative for us to raise capital right now, so they were all fully supportive as indicated by all their participation in the IPO. All the investors, including Johnson & Johnson (NYSE:JNJ) and Medtronic, participated in the IPO.

MassDevice: Was selling the company ever on the plate of options you looked at?

SR: In this space, there’s constant conversation with various parties and those conversations were ongoing, but we’ve always taken the tack that we’re going to run it forever and build it that way. We raised the capital to allow us to do that.

MassDevice: So will you be wintering in Australia now?

SR: I think it’s fair to say it’s a nice place to be in February.

MassDevice: How do you think the investment community in Australia is receiving the story of GI Dynamics?

SR: I think they’re loving the story. There’s no question they love the story. It’s a challenge in a very volatile global equity market, which we’re in right now. Add to that a relatively thinly traded stock and that adds to the volatility.

MassDevice: Is there a quality-of-life difference for you personally, going to from a privately-held firm to a publicly traded company?

SR: I haven’t noticed a big difference other than the travel. I’ve been involved with public company boards before, so I was prepared for that.

MassDevice: Are your peers interested?

SR: I’m getting many, many phone calls from my peers, who are CEOs of privately funded device companies now, to learn more about the process. I think there will be more [med-tech companies] that do this.

MassDevice: Does Wall Street have any appetite for pre-commercial med-tech companies?

SR: They don’t right now. We talked to them in the first and second quarter and the window for pre-revenue device companies was just not open. That window typically lags the window when revenue generating companies can go public. I think since August, a ton of IPOs have been pulled.

My suspicion is that the U.S. med-tech IPO window is closed pretty tightly right now, which is very unfortunate. The venture guys are all getting squeezed. The unpredictability from FDA is making those timelines become more unknown, so the venture guys have to assume that things are going to take longer and go slower, therefore their returns are going to go down. They’re reluctant to invest.

A number of years ago there were a number of mezzanine-level investors and IPO investors. Many of those have disappeared as well, so there’s a real dearth of financing options for later-stage med-tech companies today. When you’re at later-stage or higher valuation, you’re too big for venture and the IPO window isn’t open and some of these mezzanine players that used to be there, there’s not many left – and I would add that they are very focused on companies’ U.S. plans as opposed to global plans. The international investors take an opposite view. They view the U.S. as an important market, but we made the argument that we could be a very successful company before even being approved in the U.S.

MassDevice: International has always been in your plans from the beginning, right?

SR: Oh yes. India has more Type II diabetics than anywhere else in the world and China will likely surpass them in the next few years. There are clearly market access challenges in those markets, but Type II diabetes in India and China, by the numbers, are the largest in the world. In Asia, they understand that, because for some reason that no one can particularly understand, Asians get Type II diabetes at a much lower BMI than Caucasians do.

MassDevice: Is there a global market that looks any less daunting, from a market penetration standpoint?

SR: I think India looks less daunting right now. There’s a significant self-pay population, a more established middle class. There’s a more established health care system, regulatory-wise it’s easier than China. There’s a lot of good attributes of the Indian market that are attractive to us. Having said that, we still need to figure out how to access that market.

MassDevice: Will we see any further liquidity events for you guys?

SR: You can never predict that. We have sufficient capital for the time being. But always raise more capital than you need. We left Australia in early August. Between then and when we listed the company a month later, the entire financial world had changed. A few weeks earlier or later we would have had a different outcome in our financing.

MassDevice: Are you satisfied with the outcome?

SR: Oh yeah. We’re thrilled. We were the largest IPO in Australia this years in terms of dollars raised. We got what we wanted in terms of the amount we were looking for.