Ellipse Technologies Inc. is gearing up to test the initial-public-offering waters.
The Aliso Viejo-based company filed paperwork this month with the Securities and Exchange Commission to sell up to $75 million worth of shares.
Ellipse, established in 2005, makes minimally invasive, adjustable orthopedic implants.
Its Magec device is used to treat early-onset scoliosis, or a spine curvature found in some children. Ellipse promotes Magec, which is remote-controlled by a surgeon in order to make adjustments, as a less-painful alternative to growing rods implanted in children 10 and younger.
The company’s Precice device is used to correct limb inequality caused by injuries, such as post-traumatic fractures. The two devices received Food and Drug Administration approval last year.
[Ellipse’s PR guy is attempting to get a comment. If it comes, it will go here]
Magec “has the potential to become the standard of care for a wide range of orthopedic conditions,” Ellipse said in the filing, adding that the company believes it “offers compelling alternatives to conventional implants by enabling improved quality of life and patient satisfaction and a strong healthcare economic value proposition.”
Ellipse’s filing noted that Magec technology is also included in several pipeline products that address other orthopedic markets, including trauma, knee osteoarthritis, and degenerative spine disease.
It didn’t specify a net proceeds amount, saying it would use $25 million of the proceeds to expand its sales and marketing programs; $15 million for research and development activities; $5 million to repay a loan; and the remainder for working capital and general corporate purposes.
Figures from market tracker Renaissance Capital show that healthcare IPOs have gained popularity. There have been 70 such deals so far this year with total proceeds of $6.2 billion. Renaissance’s figures show that there were 102 healthcare IPOs in 2014; proceed figures weren’t available.
Ellipse’s filing didn’t give a price range for its shares or an offering date. It said it will trade on the Nasdaq Global Market under the symbol MGEC.
Market
The company would compete in a large market. It said in its filing that the “global addressable market opportunity” for Magec and Precice was about $1.2 billion last year based on data from Huntington Beach-based Life Science Intelligence Inc.
Ellipse, like many other early-stage medical device makers, isn’t profitable. The company lost $3.5 million on revenue of $20.3 million in the first six months of the year. It lost $3.2 million on revenue of $26 million last year.
It refers to the financial history in the filing: “As a result of our historical losses, we had an accumulated deficit of $37.7 million at June 30, 2015.”
Ellipse said it anticipates its losses will continue “as a result of ongoing commercial expansion operations, including higher manufacturing, sales and marketing costs.”
Company founder and Chairman Michael Henson has a long history as a serial entrepreneur in Orange County, having served as a founder, chief executive, or director of a range of medical device makers. Six of his startups were eventually sold to large multinational companies, and Ellipse and several other Henson-associated companies are either going to have or already had initial public offerings.
Ellipse’s board also includes John Kilcoyne, chief executive of Lake Forest-based ReVision Optics Inc., which makes corneal inlays for treating presbyopia.
Management
Its management team includes Chief Executive Edmund Roschak and Chief Financial Officer Robert Krist, who previously served in the same position with Irvine-based aneurysm device maker Endologix Inc.
Other Orange County medical device makers are working on different spinal conditions.
Vertos Medical Inc. in Aliso Viejo has developed a procedure and devices to treat lumbar spinal stenosis, or a narrowing of the spinal canal.
Piper Jaffray & Cos. in Minneapolis and Chicago-based William Blair are among the offering’s underwriters.
