The initial public offerings market has been slow going for medical device companies in recent years, and it isn’t likely to pick up anytime soon.
While the IPO market won’t be completely dead, “companies that I speak with aren’t thinking about IPOs in the near term,” said Jason Mills, managing director of medical devices equity research with Canaccord Genuity. Mills participated in a panel discussion on cardiovascular investing at the Cleveland Clinic Medical Innovation Summit.
Reverse mergers or IPOs in different countries, such as a recent Australian IPO by device firm GI Dynamics, could be better alternatives to the U.S. market for device firms, Mills said.
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Aside from recent volatility in the public markets, the problem for device firms is that valuations aren’t what they used to be. “Institutional investors just aren’t willing to pay up,” Mills said.
That’s good news for the venture arms of big corporations, such as Medtronic or Abbott Laboratories, but not exactly music to the ears of device entrepreneurs.
Plus, with regulatory uncertainty and reimbursement pressures, the bar is much higher than it used to be for device companies to draw investment in the first place, said John Maroney of Menlo Park, California-based Delphi Ventures.
Even series A fundings for cardiovascular device firms have fallen in recent years, relative to investments in pharmaceuticals firms. From 2008 to 2010, cardiovascular device firms received 22 series A investments, while pharmaceutical firms received 12. But since 2010, drug and cardiovascular device firms have each received four series A rounds, according to panel moderator Roger Longman.
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But, not to worry, device entrepreneurs, being public often isn’t all it’s cracked up to be anyway, said another panelist, Antoine Papiernik of Sofinnova Ventures.
“You can do a lot by being private,” he said. “Sometimes you don’t want to be public.”