October 21, 2013

Wall Street Journal

Life Sciences IPO Boom Leaves Out Medical Devices

Biotechnology startups have stampeded to the public markets this year, but their colleagues in the medical device field have sat quietly on the sidelines.

So far this year, 27 venture-backed biopharmaceutical companies have gone public, compared to just one medical device company, according to industry tracker Dow Jones VentureSource.

While biopharmas generally go public in greater numbers than medical device companies, the spread has never been this great–in 2007, for example, 19 biopharmas went public, compared to 10 medical device companies, a more representative ratio.

Dating back to 1992, biopharma IPO frequency has ranged from roughly equal to that of medical devices, to double or triple the rate in some years. The biggest spread was in 2000, at the height of the last IPO boom, when 46 biopharmas went public, compared to nine medical device companies.

So could there come a day when people talk about a medical-device IPO boom the way they talk about the biotech boom of today?

Investors in medical devices say yes, that day could come–but a lot of stars will have to line up before it happens.

“I’m optimistic that you can have the same type of thing in devices, but you won’t see the same numbers, or the same amount of money going in or the same number of acquirers” spurring the action, said Mike Carusi, a longtime device investor withAdvanced Technology Ventures.

Mr. Carusi has had a number of device investments turn into public companies, and a number of others snapped up by larger companies, including portfolio company Ardian Inc., a hypertension treatment-device developer that was acquired by Medtronic for $800 million in 2011.

Biotech and medical devices are an apples-and-oranges comparison, he said. New drugs are usually perceived as having the potential to serve much larger segments of the population and are seen as more likely to be acquired for a high price even if they have already gone public.

On the other hand, medical devices–which can refer to everything from laser-based surgical tools to implantable stents to imaging machines–are seen as having a relatively limited market.

“Public biotech investors see tremendous market potential for any single product,” he said. “What drives this market activity is the belief that big pharma is hungry for growth.”

While there are several big acquirers of medical devices, they are fewer, and their sales are not generally expected to be as high as in pharma, he said.

To read the full article, visit:  http://blogs.wsj.com/venturecapital/2013/10/21/life-sciences-ipo-boom-leaves-out-medical-devices/

By Timothy Hay
Venture Capital Dispatch