Orange County has its share of private medical device and drug companies that could eventually become initial public offering candidates within the next couple of years.
They’d be following in the footsteps of Laguna Hills-based Glaukos Corp., which makes devices to treat glaucoma, an eye disease that’s a major cause of blindness.
Glaukos went public at the end of June when it offered 5,358,000 shares of its common stock at $18 a share.
Shares opened 61% higher than its estimated offering price, raising $113.7 million, and have since held steady, giving the company a recent market value of about $1 billion.
“Clearly, this was a very opportune time for us. The performance of healthcare stocks in IPOs has been quite robust,” said Tom Burns, Glaukos’ chief executive.
Several healthcare IPOs, including those that went off at roughly the same time as Glaukos’, have seen price hikes prior to the late-August-early September market decline.
North Billerica, Mass.-based cardiovascular diagnostic device maker Lantheus Holdings Inc. was once 42% over its closing price.
Seres Therapeutics Inc., a Cambridge, Mass.-based drug developer, has seen its stock rise 45% since it went public in late June.
Burns said that even without those examples, Glaukos’ performance has strengthened investor interest.
“I think more importantly, our position has really been transformed in the last couple of years with the regulatory and commercial approval of the iStent in June of 2012.
“We were able to wring considerable regulatory risk and clinical risk out of the business, and then I think we performed very, very well,” he continued.
Glaukos’ product pipeline also attracted investors, according to Burns.
“When you took all those together, the investment community recognized this is a company that had demonstrated execution [on] the commercial side and regulatory and clinical side,” he said.
The company sees itself as a trailblazer within the glaucoma treatment market because its treatment is a device rather than a drug or surgery.
“In this instance, we were kind of the icebreaker. We created this marketplace,” Burns said about whether Glaukos examined any peers before going public.
“We feel privileged to be able to build and lead this new commercial market class” of glaucoma treatment, he said.
On Verge
Companies that are on the verge of going public share several characteristics, according to Bruce Feuchter, a shareholder with Newport Beach-based law firm Stradling Yocca Carlson & Rauth who focuses on medical device practice, including IPO preparation.
He didn’t work on the Glaukos IPO.
“They have an invention, they have researched and developed their product and their procedure, they’ve gotten clinical studies completed, they’ve done their regulatory approval, and they appear to be having reimbursement payment,” Feuchter said.
“All of those steps mean, ‘I must be ready for commercial,’ ” Feuchter said.
Other potential local IPO candidates within the next couple of years could include:
• AcuFocus Inc. The Irvine-based company’s Kamra corneal inlay is used to treat presbyopia, a form of farsightedness. Kamra has been sold overseas for about five years and received Food and Drug Administration approval in April.
AcuFocus is well-funded, having raised more than $80 million over its 14-year history—including a $65 million round in 2011—and is slowly launching Karma.
The company is “always evaluating our alternatives from a strategic and capital-raising perspective,” said Chief Executive James Mazzo, who is no stranger to running public companies as the longtime head of Advanced Medical Optics Inc., which was based in Santa Ana and is now a unit of Chicago-based Abbott Laboratories.
“The Glaukos IPO proves that novel medical [devices] with large market opportunities continue to be rewarded by public investors,” Mazzo said, adding that at AcuFocus, “we are targeting one of the largest opportunities out there in presbyopia correction.”
• Alphaeon Corp. is another Irvine company with a device element that comes up in some IPO discussions among industry insiders.
Its product lineup includes lasers used in refractive eye surgery, or vision correction.
Alphaeon Chief Executive Robert Grant has been cautious when approached about a potential offering, although it was the subject of industry buzz last year.
“I would not say years” as a time frame for an IPO, Grant told the Business Journal in an October interview at Alphaeon’s Von Karman Avenue headquarters. He declined to elaborate further.
• ReShape Medical Inc., a San Clemente-based maker of weight-loss devices, just saw the FDA approve its dual-balloon device for patients with body mass indexes of 30 to 40 who don’t qualify for or don’t want gastric bypass or other surgeries.
“We don’t currently have any plans to go public, but it is one opportunity available to us,” said Richard Thompson, ReShape’s chief executive.
ReShape will “re-evaluate at a later date” the question of a potential IPO, Thompson said.
• Lake Forest-based Tenex Medical Inc., which makes minimally invasive ultrasonic devices to treat tendonitis.
• Vertos Medical Inc., an Aliso Viejo-based maker of devices to correct spinal stenosis, or a narrowing of the spinal canal, has also been name-dropped as a potential IPO candidate.
Some other OC device makers are eschewing the public markets.
• Irvine-based Breathe Technologies Inc., which makes medical devices to treat chronic obstructive pulmonary disease, a combination of bronchitis and emphysema, plans to remain independent as it grows, Chief Executive Larry Mastrovich told the Business Journal in June.
The new public ranks have included foreign companies with OC ties.
• Lombard Medical Inc., a British company with U.S. headquarters in Irvine, completed its IPO in April.
Lombard, which had a recent market value of $60.9 million, makes endovascular stent grafts to treat abdominal aortic aneurysms, or ballooning of the body’s main artery.
