This morning, commercial-stage ophthalmic medical technology
company, Avedro (AVDR), priced its 5.0 mln share IPO at $14, the low end of the
$14-$16 expected price range. Its relatively weak pricing follows news that a
couple of other deals that had been expected to price this week were postponed:
namely, Virgin Trains (VTUS) and Bank Florida (BFL).
Going back a bit further, the first IPO of 2019 -- New Fortress Energy (NFE) -- was forced to cut the size of its IPO and priced below its downwardly revised price range on January 29. Furthermore, last week, muted pricing emerged for several debutants from the formerly hot pharmaceutical space, with Alector (ALEC) and Harpoon Therapeutics (HARP) both pricing at the mid-point of expectations.
So, despite the fact that the supply of new deals has been very scarce, and with the markets forcefully recovering from a disastrous December, it would seem that potential investors still aren't fully in a "risk-on" mode. The overall quality of the deals hasn't necessarily been top-notch, but that said, we believe that a commercial stage medical tech company like AVDR would probably have seen better demand in a stronger IPO market.
In all, its deal is set to generate $70 mln in total gross proceeds. The deal was led by BofA Merrill Lynch and JP Morgan. Shares open for trading this morning on the Nasdaq.
Avedro is a commercial-stage ophthalmic medical technology company focused on treating corneal ectatic disorders and improving vision to reduce a patient’s dependence on eyeglasses or contact lenses. Its proprietary Avedro Corneal Remodeling Platform is designed to strengthen, stabilize, and reshape the cornea by utilizing corneal cross-linking in minimally invasive and non-invasive outpatient procedures to treat corneal ectatic disorders and to correct refractive conditions.
The company's Avedro Corneal Remodeling Platform is comprised of its KXL and Mosaic systems, each of which delivers ultraviolet light and a suite of proprietary single-use riboflavin drug formulations that, when applied together to the cornea, induce a biochemical reaction called corneal collagen cross-linking.
Its KXL system in combination with its Photrexa drug formulations, which it launched in the U.S. in September 2016, is the first and only minimally invasive product offering approved by the FDA indicated for the treatment of progressive keratoconus and corneal ectasia following refractive surgery.
The FDA has granted AVDR orphan drug designations; the company has orphan drug exclusivity until 2023 that covers its Photrexa formulations used within its KXL system for approved indications. AVDR has also obtained a CE mark, which allows for marketing throughout the European Union, for its Mosaic system.
The company is currently conducting a pivotal Phase 3 clinical trial pursuant to a Special Protocol Assessment for a new indication for its latest-generation KXL system and its associated investigational drug formulations and for the company’s Boost Goggles in a shorter and non-invasive procedure for the treatment of progressive keratoconus that leaves the corneal epithelium in place, a process that AVDR refers to as Epi-On.
In its IPO prospectus, Avedro provided certain preliminary
results for FY18. Its estimated total revenue is between $27.5-$27.7 mln, as
compared to $20.2 mln for the year ended December 31, 2017. The
company attributes the estimated increase in revenue primarily to an increase
in sales in the U.S., offset by a decrease in sales outside of the U.S.
The estimated increase in U.S. revenue was attributable to increased drug revenue due to an increase in the average selling price of single-use riboflavin drug formulations sold. This increase was partially offset by a decrease in the volume of single-use riboflavin drug formulations sold.
AVDR estimates that its gross margin was between 59.3%-60.6%, as compared to a gross margin of 51.1% for the year ended December 31, 2017. The estimated increase in gross margin resulted primarily from an increase in the average selling price of single-use riboflavin drug formulations and to manufacturing fixed costs being spread out as production volumes increased.
Lastly, the company estimates that its net loss was approximately between $25.2-$26.2 mln, as compared to a net loss of $21.3 mln for the year ended December 31, 2017.