Axonics Modulation Technologies’ Oct. 31 initial public offering came at the end of one of Wall Street’s worst months in stock performance in recent memory.
Chief Executive Raymond Cohen couldn’t be more pleased with the results.
“We were 10 times oversubscribed,” he said of the Irvine-based medical device company’s IPO, which was originally meant to raise about $86 million but now looks like it will bring in more than $130 million for the maker of electrical stimulation devices designed to treat overactive bladder and other urinary and bowel conditions.
In the lead-up to the IPO, the company raised both the number of shares it planned to offer to the public and its expected offering price. The offering took place at the tail end of a month when the S&P 500 lost nearly 7% of its value, its worst monthly return in seven years.
Shares of Axonics stock (Nasdaq: AXNX) were priced at $15 on Oct. 31; they currently trade slightly above that, giving it a market value of about $400 million.
“I am thrilled,” Cohen told the Business Journal last week in one of the executive’s first interviews since the company emerged from its IPO-mandated quiet period.
Cohen noted that Axonics now represents “the largest medical device IPO since 2015,” when Alameda-based neurovascular device maker Penumbra Inc. (NYSE: PEN) went public.
The funds from the super-sized offering—Axonics represents the fourth IPO of an Orange County-based company this year—are already being put to use expanding local operations.
Cohen said Axonics is “expanding in every aspect of the business,” the largest hiring push in sales and clinical-support personnel.
He said the company is assembling a specialty sales force of about 100 people, up from a previously stated goal of 60 representatives.
“In six months, we’ll be at about 250,” he said.
The company has already started hiring and currently employs about 85 at its new headquarters at 26 Technology Drive in the Spectrum area.
Most of its longest-serving employees are involved in research and development.
2nd to Market
While Axonics has yet to get Food and Drug Administration approval of its product and hasn’t generated much revenue from other markets, Cohen said the strong reception to the offering on Wall Street speaks to interest in its technology.
The company’s sacral neuromodulation technology uses mild electrical pulses to stimulate sacral nerves in the pelvis area. The pulses correct erroneous nerve messages that trigger a frequent and urgent need to urinate, and are sometimes associated with leakage.
While neuromodulation isn’t new—in the 1960s, it was used in the form of deep-brain stimulation to resolve chronic pain—the market opportunity for Axonics’ device is big, since there’s only one established player in the industry, Cohen said.
“Medtronic has a monopoly, that’s a fact. It is the only player that has a product in this category,” he said.
Medtronic PLC (NYSE: MDT) owns the implanted InterStim sacral neuromodulation systems, which are part of its ear, nose and throat line of specialty-therapy products.
The segment generated almost $1.6 billion for the year, a drop in the bucket of the Minneapolis-based diversified device giant’s $30 billion in 2018 revenue.
Axonics estimates the global sacral neuromodulation market was $605 million last year and is growing about 8% year-over-year. It said that translates to about 41,000 patient implants, including 11,000 patients undergoing replacement implants, nearly 90% of the sales in the market generated in the U.S.
“We believe the market is wildly underserved,” Cohen said.
He also said he believes the Axonics product represents a clear improvement in Medtronic offerings.
Disruptive Tech
“The average patient given this device is a 57-year-old woman. If you say yes to Medtronic, you are signing up for four [or more] surgeries for these reimplants,” he said, explaining that the average life of Medtronic’s device is four years.
He added that though they’re outpatient procedures, “it’s still surgery, and there’s the cost of co-pay, even if you have a good insurance … we think that’s why people haven’t been saying yes.”
Cohen said he believes Axonics provides a compelling alternative as the first rechargeable sacral neuromodulation system for the treatment of urinary and bowel dysfunction.
“We are about one-third the size of Medtronic’s [device], and once implanted, [it] can last 15 years or longer.”
Urology Care Foundation estimates that about 33 million Americans have overactive bladder, a sudden, uncontrollable urge to urinate, with as many as 30% of men and 40% of women experiencing some symptoms.
Outside of the implantable devices, the most typical treatments available for overactive bladder include exercise, such as pelvic floor raises; medications; and absorbent pads and diapers.
Botox and other drugs are also potential options. Irvine-based Urovant Sciences Ltd. (Nasdaq: UROV), a development-stage drugmaker that went public in September—its $140 million IPO is OC’s largest this year—is also designed to treat overactive bladder issues.
2020 Target
Axonics’ device is available in Europe and Canada. It hopes to complete its 129-patient, 12-center U.S. pivotal trial by the middle of next year.
It targets the FDA to give the green light to the product in 2020.
The company said in regulatory filings that it projects revenue for the three months ended Sept. 30 to be approximately $200,000, up from approximately $100,000 a year earlier, related to the sales of its device to two new customers in Canada and one new customer in Europe.
Its quarterly operations loss was projected to be $7.5 million to $8.5 million due to increased general and administrative costs related to the offering and employee-related expenses resulting from increased headcount.
It has an accumulated deficit of about $67 million since its inception five years ago.
Reaching Patients
Cohen said going public is “absolutely the right decision” and that as a public entity it has the opportunity to expand the market by raising patient awareness.
He said the patient story has become very important to him.
“It’s not normal for middle-age women to leak in their pants; women shouldn’t suffer in silence and think there’s nothing they can do about it. It’s not true, these old wives’ tales that say this is just a normal part of aging.”
The company presented positive results of its multicenter prospective clinical study at last year’s International Continence Society Congress in Florence, Italy.
A total of 51 overactive, bladder patients—the median age of the cohort was 52 and consisted of 75% women—were evaluated, and after one month, 71% of implanted subjects experienced at least a 50% reduction in bladder issues.
“It’s not a life-and-death problem, but we have a real opportunity to change the quality of life in patients … not [having to] plan your day around, ‘How close I am to the toilet?’” Cohen said.
That wasn’t always the case for the industry veteran, who admits that when he started the company in 2013 it was about market size, competition, and whether there was an existing reimbursement code.
He said the company is now focused on getting the word out, whether that’s optimizing search engines to push sacral neuromodulation higher on search engine results, print media exposures or ramping up social media.
It’s also working to help urologists and gynecologists better communicate with patients.
“I fully intend to talk about the problem,” he said.
Cohen has over 35 years of experience at leading medical device companies. He served as chief executive of Laguna Hill-based Vessix Vascular Inc. from 2010 to 2012, before its acquisition by Boston Scientific Corp. (NYSE: BSX).
Vessix makes a catheter-based renal denervation system for uncontrolled hypertension.
He’s currently chairman of Bothell, Wash.-based Biolife Solutions Inc. (Nasdaq: BLFS) and a board member at Henderson, Nev.-based Spectrum Pharmaceuticals Inc. (Nasdaq: SPPI). The latter has a 56,000-square-foot administrative and research and development facility in Irvine.
Full Offering
While overactive bladder issues are the focus of the company’s product efforts, other potential applications include fecal incontinence and urinary retention.
Cohen said the company is in discussions with the FDA on whether it needs to conduct additional trials for the other indications. In 2016, Axonics received regulatory approval in Europe and Canada for the treatment of overactive bladder, urinary retention and fecal incontinence.
Before the IPO, it raised over $100 million in venture financing from a variety of investors, including European healthcare investor Gilde Healthcare, La Jolla-based CICA Inc. and Boston-based Cormorant Asset Management, and international investors, including NeoMed Management in Geneva and Beijing-based Legend Capital.
