Orange County’s crop of privately held, venture-backed medical device companies is poised to graduate one of its best-funded members into the ranks of public companies.
Laguna Hills-based Glaukos Corp., a maker of glaucoma-treatment devices that has raised more than $125 million in venture funding since its inception in 2001, officially set its upcoming initial public offering last week, according to a federal filing.
Glaukos plans to offer 5,358,000 shares of common stock at $13 to $15 a share. The company would be valued at $386.2 million to $445.6 million based on total outstanding shares after the IPO, according to its Securities and Exchange Commission filing.
Glaukos declined to offer any comment beyond its filing, which said it expects net proceeds to total $66.6 million, or $77 million if the offering’s underwriters exercise an option to buy shares in full. Underwriters include Bank of America Merrill Lynch, J.P. Morgan, Goldman Sachs & Co. and William Blair & Co.
The company said in its filing that it will use the net proceeds for several purposes, including:
• About $20 million to hire additional sales, marketing, and customer service personnel, as well as expand its marketing programs domestically and internationally.
• About $15 million to fund clinical studies that will evaluate its pipeline of devices under development and could lead to regulatory approvals for such products.
• Another $15 million to buy glaucoma-related intellectual property and other assets from Glaukos’ Laguna Hills-based affiliate, Dose Medical Corp.
Glaukos said the remainder of the funds will go for working capital and other general corporate purposes. The filing noted that it entered into a sublease for a 37,700-square-foot facility in San Clemente, effective Sept. 1, and plans for that facility to “serve as our headquarters beginning sometime in 2016.”
Glaukos is currently in a 20,800-square-foot corporate headquarters office under a lease that expires next March, it said in its filing.
$6.6 Billion
“The principal purposes of this offering are to create a public market for our common stock, obtain additional capital, facilitate our future access to the public equity markets, increase awareness of our company among potential customers and improve our competitive position,” Glaukos said in its filing.
It said it’s applied to list its shares on the New York Stock Exchange under the symbol GKOS.
The company also broke down the global market for glaucoma in its filing, saying it was “characterized by large patient populations, significant lifetime treatment expenditures, suboptimal therapies and serious negative impacts on patient quality of life.”
Glaukos’ filing quoted estimates from St. Louis-based industry tracker Market Scope showing more than 78 million people worldwide today have glaucoma, a number that’s expected to grow to more than 88 million by 2019. Of that number, 4.2 million Americans have the disease, a number that’s expected to grow to 4.7 million by 2019.
Market Scope also estimated that $4.9 billion worth of glaucoma treatments were sold last year and that that number will grow to $6.6 billion by 2019.
Glaukos’ iStent was approved by the Food and Drug Administration in 2012. The company said in its filing that it believes iStent is the smallest medical device ever approved by the regulatory agency, measuring 1 millimeter long and about a third of a millimeter wide.
Glaukos, like many early-stage companies, is not profitable. The company said in its filing that it posted a narrowed net loss of $1.5 million in this year’s first quarter compared with a loss of $4 million in 2014’s first quarter.
The device maker’s first-quarter sales were up 78% to $14.7 million.
Going Concern
Glaukos’ filing also contains a “going concern” warning, noting that the company had an accumulated deficit of $160.3 million through March 31; indebtedness of $22.3 million; and $4.2 million in cash and cash equivalents.
“We have made and expect to continue to make significant investments in our sales force and marketing programs,” Glaukos said in its filing.
The company said costs for FDA-approved investigational-device-exemption clinical studies “in our industry are expensive as are the costs to develop new products, and we expect to incur a significant increase in administrative costs as we begin operating as a public company.”
The device maker added that it expects to continue to experience net losses and that its sales performance “will significantly impact our cash management decisions.”
OC Veterans
Glaukos’ management team and board include veterans of several of OC’s historical eye health bulwarks.
Chief Executive Tom Burns once worked at Chiron Vision Corp., a company started by venture capitalist and Glaukos Chairman William Link and eventually sold to Bausch + Lomb Inc. (now part of Valeant Pharmaceuticals International Inc.); Chris Calcaterra, the company’s chief commercial officer, who once served as a senior vice president at Santa Ana-based Advanced Medical Optics Inc. (now Abbott Medical Optics).
