Outset Medical, a company making portable dialysis systems, filed preliminary paperwork for an IPO on Friday. The San Jose-based company hasn’t yet set a price range for its stock, but it said it plans to raise $100 million — a commonly used placeholder figure.
Most of Outset’s business comes from the use of its dialysis devices in a hospital setting, though it plans to push further into at-home dialysis. In April, Outset gained FDA clearance for at-home use of its Tablo Hemodialysis System. The company still must conduct post-market surveillance to closely monitor for any adverse events or needed changes, and must conduct a human factors study, per the FDA.
Tablo’s big sell is a device that’s easier and less time-consuming for patients to use for at-home dialysis. Outset Medical said current devices require patients with kidney failure to spend time making dialysate, or dialysis fluid. The company’s device makes dialysate on demand, only needing access to an electrical outlet and access to tap water.
To date, the startup has raised roughly $450 million, according to Crunchbase, with it most recent round led by D1 Capital Partners in February. Outset sells its devices to dialysis clinics, and its two biggest customers currently include an unnamed government distributor, which accounted for nearly 20% of its revenue, and a federal health department, which brought 16% of its revenues.
The company brought in $15.1 million in revenue in 2019 and reported a net loss of $68.3 million. For the first half of 2020, it brought in $18.9 million and reported a net loss of $47.2 million. As of June 30, the company had $148.4 million in cash and equivalents on its books and had a $419.7 million deficit.
It said it plans to reduce the cost of production for its devices, including establishing a new manufacturing facility in Tijuana, Mexico. But it also plans to hire more employees to scale up its manufacturing, sales and support teams.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
For healthcare providers, Outset says it can help them reduce the daily cost per treatment. In a case study with the Cleveland Clinic, Outset said it helped them reduce their costs by about 55% in the ICU, including lower supply costs and less time spent setting up the machine.
Another unnamed health system in the southeast used the devices in seven of its hospitals, accounting for roughly 1,900 beds and 15,000 dialysis treatments.
Outset’s move into in-home care comes and the Centers for Medicare and Medicaid Services is considering boosting reimbursement for in-home dialysis treatment. A proposed rule by the agency would allow Medicare to cover more of the cost for new at-home dialysis machines by treating the device as a capital-related asset for two years, allowing CMS to cover 65% of the preadjusted per treatment amount.
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