September
2007 issue
Pumping Up The IPO Pipeline:
Three Health Care Companies Price IPOs And Sixteen More File
In spite of unpleasant news from
the lending industry and the nosedive the stock market took in mid-August,
shares in health care companies that priced IPOs during the month performed
fairly well, and several more IPOs were filed.
...
Major Funding
For Spinal Implants--
Spike In Monthly Venture Capital Funding For Medical Devices
Medical device companies were responsible for the most deals and the
greatest share of venture capital in one sector during August 2007,
including the third health care venture capital deal this year that exceeds
one hundred million dollars.
...
Mergers & Acquisitions
Diagnostic companies, among other medical device targets, are a highlight of
health care merger and acquisition activity this August, with a steady flow
of deals in most other sectors as well.
...
Private Placements
More than one billion dollars in private
placement funding was announced by health care companies during August 2007,
the second time in three years we have seen this much funding committed to
these deals in a single month.
...
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Companies Mentioned in this issue:
September 2007
A
Accenture p2
Accuro Healthcare Solutions p2
Acologix p4
Adnexus Therapeutics p3, p4, p11
Advanced Technology Ventures p10
Advent International p10
Agendia BV p10
Agility Healthcare Solutions p11
AIG SunAmerica p1, p10
AkaRx p8
Alloy Ventures p11
Alltracel Pharmaceutic. p8
Alpex Pharma p11
Alta Partners p10
Alta Partners p11
ALZA Corporation p10, p11
Amedica p4, p5
Amedisys p8
American Dental Ptnrs. p8
Amerinet p2
AMS Homecare p8, p14
Anacor Pharmaceuticals p4
Apollo Health Street p8
Arboretum Ventures p11
Archemix p10
Archemix Corp. p12
ARYx Therapeutics p4
Aspen MedTech p11
Astellas Venture Management p10, p11
Atlas Venture p11
Axcell II p9
Azur Pharma p10, p11
B
Baker Brothers Investments p11, p13, p15
Banc of Amer. p4
Banc of America Securities p1, p3
BankInvest Biomedical Venture p10, p11
Baron Growth Fund p3
Bayer AG p8
BayStar Capital p3
BB Biotech Ventures p11
BDC Venture p11
BDC Venture Capital p10
Behrman Capital p8
Bell Policy Center p16
Berg & Berg Enterprises p11
BG Medicine p4
Bio-Rad Laboratories p15
Biocode Hycel p8, p9
BioCryst Pharmaceuticals p4, p13, p15
BioForm Medical p4
BioFX Laboratories p8, p9
Biolex p4
BioMarck Pharmaceuticals p11
BioProcessors Corporation p11
Blue Trading p14
Boston Life Science Venture Corporation p10
Boston Life Science Venture Corporation p11
Broadlane p2
Brookwood Pharmaceuticals p8
BZ Bank Aktiengesellschaft p11
C
Calidora Skin Clinic p11
Callisto Pharmaceuticals p14
Calypte Biomedical p4
CAMOFI Master LDC p11
Canaan Partners p10
Canyon Creek Devel. p8
Cardinal Partners p11
CardioNet p4, p5
Care Capital p11
CareMedic Systems p2
Carrington Laboratories p14
Catalyst Oncology p8, p9
CCS Medical Holdings p4
Celator Pharmaceuticals p11
Cell Therapeutics p8
Charter Life Sciences p11
Chelsea Therapeutics p4
Chicago Growth Partners p10
CIBC p4
CIBC World Markets p3
Ciphergen Biosystems p15
Citi p4
CK Life Sciences p8
Clarus Ventures p1, p10
Clinical Data, Inc. p8
CMDF p10
Concentric Medical p4
CoolSystems p12
Corcept Therapeutics p14
Cord Blood America p8
Cortex Pharmaceuticals p14
Cowen & Co. p4
Cowen & Company p3, p14
Crdentia p4
Credit Suisse p3, p4
CureSource p8
Curis p4, p14
D
Dade Behring Holdings p9
Danish Diagnostic Devel. p8
Danish Diagnostic Development p9
Davy Corporate Finance p10
Davy Corporate Finance Limited p11
Deloitte & Touche p2
Delphi Ventures p10
DeNovo Ventures p10
Department of Health and Human Services p15
Deutsche Bank Securities p3
DiagnoCure p8, p9
DietTV.com p11
Disc Dynamics p5
Domain Associates p10, p11
Drug Royalty Corp. p8
Dynavax Technologies p4
E
EarlyDETECT p4
Eclipsys Corporation p2
Ecolab p8
Ecolab Inc. p7
Edison Pharmaceuticals p11
EHS Holdings p13
EKR Therapeutics p11
Electro-Optical Sciences p4, p14
Elite Pharmaceuticals p4
Emergis p8
Eminent Venture Capital Fund p5, p10
Emisphere Technologies p14
Encysive Pharmaceuticals p14
EndoGastric Solutions p10
Entelos p8
Epidauros Biotechnologie p8
ESP Equity Partners p11
EUSA Pharma p5
Eyetech p12
F
Firstsource Solutions p8
FlowCardia p10
Fluidnet p11
Fluke Venture Partners p11
Fonds Bio-Innovation p11
Forum Bioscience Holdings p8
Forward Ventures p10
Foundation Medical Partners p10
Frazier Healthcare Ventures p10
G
GammaCan p4
Genesys Capital Partners p10
GeoVax Labs p14
Gilde Healthcare Partners p10
Gilead Sciences p8
GIMV p10
Glide Pharma p11
Global Life Science Ventures p10
Globus Medical p1, p10
Gold Hill Capital p10
Goldman, Sachs p3, p4
Greater Southeast Community Hospital p8
Groupe Cair p8
GrowthWorks Capital p10
GrowthWorks Capital Working Opportunity Fund p5
H
H.I.G. Ventures p10
Hambrecht & Quist Capital Management p10
Hana Biosciences p8, p14
Harbert Venture Partners p11
HBM BioVentures p10, p11, p12
HBM BioVentures (Cayman) p11
HealthSpring p8
HealthTrust p2
Helixis p11
HemoSense p8, p9
I
Icagen p14
Iconix Biosciences p8
Immunodiagnostic Sys. p8
Immunodiagnostic Systems Holdings p9
Index Ventures p11
Informatique Demers Lambert p8
ING p10
Innovive Pharmaceuticals p4
Inotek Pharmaceuticals p11
Insys Therapeutics p4
Integra LifeSciences p8
IntegraMed America p8
Integrated Biopharma p4
InterWest Partners p10
Invemed Catalyst Fund p3
Inverness Medical p8
Inverness Medical Innovations p9
Invus Group p14
Invus Group LLC p13
IPC The Hospitalist Co. p4
Isolagen p14
IsoTis p8
J
James Richardson & Sons p5, p10
Javelin Pharmaceuticals p4
JMP Securities p14
JP Morgan Partners p10
JPMorgan p3, p4
JWM Family Enterprises p11
K
KFx Medical p11
Kindred Healthcare p8
Kleiner Caufield Perkins & Byers p15
Kleiner Perkins Caufield & Byers p13
L
Landmark Nursing & Rehab. p8
Latterell Venture p11
Lazard Capital Markets p3
LDR Spine p5
Leerink Swann & Company p14
Lehman Brothers p4
Leon Med. Ctrs. Health Plans p8
Leptos Biomedical p11
Lexicon Pharmaceuticals p13, p14
Life Sciences Partners p10
Lipa Pharmaceuticals p8
LSP BioVentures p11
Lux Biosciences p12
M
MAKIZ p8
Marshall Edwards p14
Masimo p1, p4
Matritech p8
McKesson Corporation p2
MedAssets p2, p4
MedAssist Holding p8
Medco p7
Medco Health Solutions p8
Medical CV p4
Medicure p14
MedImmune Ventures p11
Memory Pharmaceuticals p4
MentorTech Ventures p11
Merck p10
Merrill Lynch p3, p4
Merriman Curhan Ford p4
Metropolitan Dental Hldgs. p8
MGI Pharma p8
Microtek Medical Holdings p7, p8
MidSouth Capital p4
Milestone Pharmaceuticals p11
Minnesota Thermal Science p16
Mirabilis Medica p11
Molecular Analytical Systems p15
Molecular Partners p11
MonoSolRx p4
Montreux Equity Partners p10
Morgan Stanley p4, p8
MPM Capital p5, p10
MSBi Capital p11
Mundipharma p15
MVM Financial p11
N
Nanogen p14, p15
Nanosphere Technologies p4
Navigant Consulting p2
Nereus Pharmaceuticals p10, p11
NeurAxon p10
Neuro Discovery p10
Neuro Discovery p5
Neurobiological Technol. p4
Neuromed Pharmaceuticals p5, p10
Neurotech p12
NeuroVentures Fund p10
New Science Ventures p10
NovaQuest p11
Novation p2
Novo A/S p10, p12
O
Oakwood Medical Investors p10
Oculus Innovative Sci. p4
Oculus Innovative Sciences p14
Okapi Venture Capital p11
OncoVista p11
Ophthotech p10, p12
Oragenics p14
Oramed Pharmaceuticals p14
OrbiMed Advisors p10, p13, p15
Orbotech p8
Orbotech Ltd. p9
OrthoRehab p12
ORTHOsoft p8
Orthovita p4
Oscient Pharmaceuticals p3
OSI Pharmaceuticals p12
Osteologix p4
Oxford Bioscience Partners p11
Oxford Capital Ptnrs. p11
Oxford Technology 4 VCT p11
P
Pacific Pharma Technologies p8
Pacific Venture Group p10
Panorama Capital p11
Paperboy Ventures p14
Pappas Ventures p10
Par Pharmaceutical p8, p14
Peplin p4
Perot Systems p8
Pevion Biotech p11
Pfizer p8, p12, p14
Pharmelle p11
Piper Jaffray p3, p4
PolyMedica p7
PolyMedica Corporation p8
Positron Corporation p4
Precision Therapeutics p4
Premier, Inc. p2
Presidio Pharmaceuticals p11
Prospect Venture Partners p11
PURE Capital p14
Q
Quaker BioVentures p11
R
RAB Special Situations (Master) Fund p14
Radiation Therapy Svs. p8
Reliant Pharmaceuticals p3, p4
Riverside Partners p16
Roche p15
Roche Venture Fund p10, p11
Rockdale Medical Center p8
Rockport Venture Partners p10
Rockport Venture Partners p11
Rodman & Renshaw p14
Royal Bank of Canada p10
Royal Senior Care p8
S
Schering-Plough p4
SecureWorks p16
Seven Hills Partners p14, p15
Shionogi & Co. p15
Siemens AG p9
Signalife p13, p14
Signature Hospital Corp. p8
Signet Healthcare Partners p11
Smartrac NV p8
Smith Healthcare p8
Solantic p5
Specialty Hosp. of Amer. p8
Specialty Surgical Instrum. p8
Split Rock Partners p11
Stada Arzneimittel p8
Stada Arzneimittel AG p8
Stephens Investment Management p13
Sucampo Pharmaceutic. p4
Sucampo Pharmaceuticals p1
Surgery Partners Hldgs. p8
SurModics p8, p9
SV Life Sciences p10, p12
Symmetry Medical p8
Synpart AG p8
SyntheMed p14
Synthes Spine p5
T
Taiwan Global Biofund p10
Texas Pacific Group Ventures p13
The Aurora Funds p11
The Gables Surgical Center p8
The Greens Communities p8
The Palmer Club p8
The SSI Group p2
The Veranda p8
The Wyndmoor p8
ThinkEquity Partners p14
Thomas McNerney p11
Three Arch Partners p11
Tobira Therapeutics p10
TOPIGEN Pharmaceuticals p11
TOTALtrak Global p8
Two Lighthouse Inns p8
U
UBS p4
UCB Pharma p11
UnitedHealthcare p16
University of Connecticut p16
Upstream Biosciences p8
V
Van Herk Biotech p10
Vein Clinics of America p8
Ventures West Capital p10
Vermillion p14, p15
VIA Pharmaceuticals p4
Vyteris p14
W
Waterford Gdns. p8
Waters Medical Systems p8
Wexford Capital p11
Wilkinson Corp. p8
William Blair & Company p3
WuXi PharmaTech p1, p4
Y
YA Global Investments Fund p13
YA Global Investments Fund p14
Yorkville Advisors p13
Z
ZARS Pharma p4
Zavata p8
Zecotek p14
Zimmer Holdings p8 |
Pumping Up The IPO Pipeline--
Three Health Care Companies Price IPOs And Sixteen More File
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The public markets were, no
doubt, like a trip on a roller coaster for some during this past
August—but for others, presented a chance to buckle in and get ready for
the ride. Three health care companies priced IPOs—Sucampo
Pharmaceuticals (NASDAQ: SCMP), Masimo (NASDAQ: MASI) and
WuXi PharmaTech (NYSE: WX)—all during the first two weeks of the month
(imagine that). Bankers were right on the money in these IPOs, too, with
all three priced within or very near the expected ranges and in the
aftermarket, all three continuing to trade above the IPO prices right up
to press time and primarily on the upswing—even when the broader markets
stumbled in mid-August, pulling some other newly public health care stocks
down too.
So in spite of unpleasant
news from the lending industry, particularly sub-prime lending, now may be
a good time for health care companies to price an IPO, or prepare for one.
The broader markets began to recover toward the end of the month and
health care companies seemed to be following suit, and two that priced
IPOs exhibited somewhat impressive aftermarket performance. During August
2007 alone, 16 health care companies filed for initial public offerings
that are worth a combined total of more than $1.8 billion. One company is
actually filing for the second time to go public, after withdrawing its
first IPO filing in November 2005, and this time the offering is about
one-third larger. Another company’s recent decision to go public already
has some people talking, partly because of the magnitude of the offering
and partly because of the businesses it operates.
MedAssets
filed in August for a $230 million IPO, which is the largest we can
remember in the e-health sector, and probably the first of the health care
group purchasing organizations (GPOs) to be going public. MedAssets was
founded in 1999, as a Missouri-based GPO known as MedAssets HSCA, Inc.,
which served more than 16,000 providers and acquired a Florida-based
radiology GPO in 2002. At that time, Rand Ballard was the company’s CEO,
and today he is the COO, while John Bardis is currently the CEO. A few
years later, MedAssets began to really grow in new directions, acquiring
seven e-health companies in 2005 and 2006, all in separate deals totaling
about $144.7 million. The targets included providers of supply chain
consulting and technology services, market intelligence, decision software
and support, and most recently, providers of revenue cycle solutions and
outsourcing services to the health care industry.
These days, MedAssets is
known as a provider of customer-specific, technology-enabled products and
services that are integrated along with existing systems and enterprise
software at hospitals and health systems, in order to deliver solutions
designed to improve operating margins and cash flow. MedAssets is
currently serving a customer base that includes more than 125 health
systems and more than 2,500 acute care hospitals and about 30,000
ancillary or non-acute provider locations, including those that are part
of the health systems. Its revenue cycle management segment currently has
more than 1,000 hospital customers, which MedAssets believes makes it one
of the largest providers of revenue cycle management solutions to
hospitals. Its "spend management" business segment manages approximately
$15 billion of supply spending by health care providers, with more than
1,700 hospital customers, and includes the third-largest GPO in the United
States. For the twelve months ended December 31, 2006, MedAssets generated
net revenue of $146.2 million, net income of $8.6 million and adjusted
EBITDA of $50.8 million.
Now based in Alpharetta,
Georgia, MedAssets’ primary competitors in the market for its spend
management products and services are other large GPOs, such as Novation,
Premier, Inc., Broadlane, HealthTrust and Amerinet.
But that’s not MedAssets’ only business—in part because the company has
acquired several businesses in the past few years. MedAssets also provides
revenue cycle management products and services that compete with products
and services provided by the likes of McKesson Corporation (NYSE:
MCK), Eclipsys Corporation (NASDAQ: ECLP), Accenture (NYSE:
ACN), Deloitte & Touche and Navigant Consulting (NYSE: NCI),
as well as providers of niche products and services, such as CareMedic
Systems, Inc., Accuro Healthcare Solutions Inc. and The SSI
Group, Inc.
In addition to competition
from some big names, MedAssets faces other challenges, including the
ongoing integration of its most recently acquired businesses into the
greater scope of the company and the necessary maintenance of its
strategic alliances and collaborations. The company also relies on certain
open-source software, data providers and third-party vendors to do
business. Plus, there has been some speculation from the industry as to
whether MedAssets, having been founded as a group purchasing organization,
can equally and fairly satisfy its shareholders and its clients. MedAssets
expects to use the proceeds from the financing, in part, to pay down the
debt that financed recent acquisitions, as well for general corporate
purposes, including potential expansion, acquisitions and investments.
Just a few months ago we
were wondering if more health care companies would re-submit IPO filings
this year, and in August we saw another one jump on that bandwagon.
Reliant Pharmaceuticals originally filed for a $300 million IPO on the
NYSE in May 2005, with underwriters led by Goldman, Sachs and
including Banc of America Securities, Deutsche Bank Securities,
JPMorgan, William Blair & Company and Lazard Capital
Markets—but withdrew that filing in November 2005. During 2003 alone,
Reliant had raised $252 million in venture funding from investors
including Invemed Catalyst Fund, BayStar Capital, Baron
Growth Fund and Goldman, Sachs. No further venture rounds have been
publicly announced since then, but in 2006, Reliant sold the United States
rights to a cardiovascular product, ANTARA 130 mg (fenofibrate) capsules,
to Oscient Pharmaceuticals (NASDAQ: OSCI) for $82 million.
This time around, Reliant’s
IPO is expected to pull in $400 million, led by Goldman, Sachs, together
with Merrill Lynch and still including Banc of America and Lazard.
Reliant is a pharmaceutical company that currently markets a portfolio of
branded cardiovascular products, with its focus on marketing
promotionally-sensitive pharmaceutical products to the primary care,
cardiovascular and specialist physician markets in the United
States—professional groups that are considered to write prescriptions at a
high rate. Reliant acquires the rights to branded pharmaceutical products
that typically have regulatory exclusivity or patent protection, then
implements highly-focused marketing campaigns and strategies to extend the
life cycles of those products. It also acquires the rights to, and
develops, product candidates in mid- to late-stage clinical development,
in an effort to minimize many of the risks associated with early-stage
drug discovery.
Reliant currently markets
four cardiovascular products in the United States, and in its most recent
S-1 reported net product sales of $312.6 million in 2006. The company
believes its sales and marketing team, with approximately 875
representatives, has the ability and capacity to drive substantially
higher revenues, targeting promotions to primary care and specialty
physicians, as well as selected hospitals and academic centers in the
United States. Reliant has in-licensed or acquired all of its currently
marketed products and is actively pursuing both strategic acquisitions and
in-licensing opportunities to augment growth, maximize the value of its
commercial infrastructure and further diversify its product portfolio.
In an interesting side note,
29 health care companies priced IPOs from the beginning of this year
through August 31. Ten of these IPOs were valued in excess of $100 million
each, including two priced in August: Masimo, a global medical technology
company that develops, manufactures and markets non-invasive patient
monitoring products, and WuXi PharmaTech, a leading China-based pharma and
biotech R&D outsourcing company. Masimo, with underwriters led by Piper
Jaffray and Deutsche Bank, priced 11,916,626 shares mid-range at
$17.00 per share, and as we were going to press its shares were trading at
about $21 per share. WuXi, together with Credit Suisse, JPMorgan
and other underwriters, priced 13,188,979 American Depositary Shares (ADSs)
at $14.00 per ADS, but the stock was trading at about $27 per ADS by the
time we went to press. Though not as large as MASI’s or WX’s, the initial
public offering of Sucampo Pharmaceuticals was also priced during August.
SCMP, with underwriters led by Cowen & Company and CIBC World
Markets, priced 3,750,000 shares at $11.50 per share—including 625,000
shares offered by a selling shareholder. SCMP is concentrating on the
discovery, development and commercialization of proprietary drug products
based on prostones, a class of compounds derived from functional fatty
acids that occur naturally in the human body, for the treatment of
gastrointestinal, respiratory, vascular and central nervous system
diseases and disorders. Apparently the bankers on this deal were well in
tune with market forces; although the IPO was priced below the original
estimate of $14.00 to $16.00 per share, during its first two days on the
market, SCMP’s stock traded up slightly, closing at almost $12.00 per
share.
During August, Adnexus
Therapeutics, a Waltham, Massachusetts-based biotech focused on
developing a group of potential therapeutic compounds called Adnectins,
not only filed for an $86.3 million IPO, but also announced it had raised
$15.5 million in venture funding. The proceeds from the Series C venture
round, as well as the anticipated proceeds from the IPO, are primarily to
fund clinical development activities related to its lead product, which is
currently in phase I trials in oncology.
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