Earlier this morning, medical device company ShockWave Medical
(SWAV) priced its upsized 5.7 mln share IPO at $17, above the $14-$16 expected
price range. The IPO market has been ice cold in 2019 with limited pricing
activity. Even companies that have managed to push IPOs through have seen their
deals met with lukewarm interest at best. That includes healthcare-related
IPOs, which have been in such strong demand over the past couple of
For instance, last week Kaleido Biosciences' (KLDO 13.34, +0.04, +0.30%) deal priced well below expectations at $15 vs. the $20-$22 projected range. Just prior to that, we saw Stealth BioTherapeutics (MITO 16.73, +0.83, +5.19%), Avedro (AVDR 11.61, -0.24, -2.03% ), and Hoth Therapeutics (HOTH 5.95, -0.08, -1.33% ) each price at the low end of expectations as well.
SWAV's IPO is bucking this recent trend of weak pricings, which is an encouraging development. Of course, one strong pricing isn't enough evidence to say that the tide has turned. However, it is interesting that SWAV found much stronger demand in the wake of Lyft (LYFT) and Pinterest both filing for IPOs. That news effectively told investors that an end was in sight for this ongoing drought in the IPO market. If two premier companies, such as Lyft and Pinterest, are confident enough to launch their deals now, other companies who have been holding off on their IPOs will likely follow suit.
As for SWAV's deal, it generated $96.9 mln in total gross proceeds, almost 30% more than it had anticipated. The lead underwriters on the deal were Morgan Stanley and BofA Merrill Lynch. Shares are slated to open for trading later this morning on the Nasdaq.
SWAV is a medical device company focused on developing and commercializing products intended to transform the way calcified cardiovascular disease is treated. It aims to establish a new standard of care for medical device treatment of atherosclerotic cardiovascular disease through its proprietary local delivery of sonic pressure waves for the treatment of calcified plaque, which it refers to as intravascular lithotripsy (IVL).
IVL is a minimally invasive, easy-to-use and safe way to significantly improve patient outcomes. SWAV's Shockwave M5 IVL catheter was CE-Marked in April 2018 and cleared by the FDA in July 2018 for use in its IVL System for the treatment of peripheral artery disease (PAD). The Shockwave C2 IVL catheter, which it is currently marketing in Europe, was CE-Marked in June 2018 for use in its IVL System for the treatment of coronary artery disease.
SWAV has ongoing clinical programs across several products and indications which, if successful, will allow it to expand commercialization of its products into new geographies and indications. Importantly, it is undertaking ongoing clinical trials of its C2 catheter intended to support a pre-market application in the United States and a Shonin submission in Japan for the treatment of CAD. The company anticipates having final data from these ongoing clinical trials intended to support a U.S. launch of its C2 catheter in the first half of 2021 and a Japan launch in the second half of 2021.
The first two indications SWAV is targeting with its IVL System are CAD and occlusive PAD. Occlusive PAD is the narrowing or blockage of vessels that carry blood from the heart to the extremities, while CAD is the narrowing or blockage of the arteries that supply blood to the heart. The global PAD device market size for treatment of occlusive disease is estimated at approximately $2.9 bln and is expected to grow approximately 3% annually due to the fundamental drivers of an aging population and increasing prevalence of diabetes.
The company believes its IVL System to treat PAD has a total addressable market opportunity of over $1.7 bln.
Taking a look at the financials, product revenue increased 613% in FY18 to $12.3 mln. The increase was primarily due to an increase in the number of customers and an increase in purchase volume of its products per customer both within the United States and internationally.
Gross margin percentage improved to 41% for the year that ended December 31, 2018. This change in gross margin percentage was primarily due to increased sales volume of its catheters. Sales and marketing expenses increased by $11.2 mln, or 176%, to $17.5 mln and Research and Development increased 26% to $22.7 mln.
As a result, the company had an operating loss of ($41.2) mln for FY18, compared to ($30.9) mln in FY17.