With 2014 a rebounding year for medical device and biopharmaceutical IPOs, 2015 should build further on that progress, a panel at the MedTech Investing Conference said this week.
The Minneapolis conference explored a wide range of life science industry topics, including a panel on the IPO market that included 2 CEOs of companies that have gone public and 2 experts representing the investment side of the equation.
The panelists noted that recent months have seen "white hot" IPO activity, especially in the biotech sector. There were 72 biotech IPOs filed in 2014, said J.P. Peltier, global group head of healthcare investment banking Piper Jaffray.
Peletier said low volatility and healthy fund flows are creating a strong IPO environment.
"We’re on pace for an all-time record high for transactions in the marketplace this year," he added.
Michael DeMane, CEO of Nevro Corp. (NYSE:NVRO), which is developing a spinal stimulation device, talked about the challenges of launching an IPO with a company that does not yet have FDA approval for its product.
"In the early stages there was some trepidation," he said. "We engaged very early with analysts and bankers and we really tried out our story and were transparent," he said. By having talked to many people over a period of time, he said, confidence in the company became strong among the investment community.
For companies in the process of going public, DeMane said it’s very important to remain focused on execution. "It is easy to get distracted," he said. "If you’re going to achieve your objective, you’ve got to stay focused." As an example, he noted that the day before his company went public, the markets suddenly experienced volatility, which had some in the company questioning whether the IPO should go on as scheduled. In the end, the timetable was not changed, and DeMane said he suspects a delay could’ve hurt the company by triggering doubts among investors.
Brian Farley, the former CEO and current board member at Entellus (NSDQ:ENTL) a device manufacturer that specializes in sinusitis therapies, said his company’s IPO experience was a little different than that of Nevro’s.
"We had checked off all the boxes," he said. "We had FDA clearance, we had good revenue growth rates, we had good insurance coverage … so when we tested the waters, it was more to hone the road show."
In the Q&A section of the discussion, panelists were asked about dot-com-type companies, such as 23andMe. The panelists noted that some of these companies can jump into traditional medtech investment space, but their interest can run hot and cold. "These opportunities exist," said Nimesh Shar, a partner with Domain Associates. "[But] it’s not a broad-based effort. … There’s some sort of "it" factor that drives the interest. It does happen, but it’s not predictable in any way."
The executives with the 2 medtech companies agreed it was very important to have experienced, competent board members, and they also discussed how the dynamic of a company changes when it moves from private to public.
DeMane said the sharing of information has to change in a company that has gone public. "I’ve always managed organizations with a kind of open exchange of information," he said. "That is not very practical in a post-IPO environment. What you don’t want to do is make all your employees ‘insiders,’" he said. "It requires that start to limit your conversations. I find that very restricting; I don’t like it. But you go about your business and you adapt."