IPO Launch: Acutus Medical Proposes Terms For $125 Million IPO
According to an amended registration statement, Acutus Medical (AFIB) plans to raise $125 million from the sale of its common stock in an IPO.
The company is commercializing imaging, modeling and other devices for cardiac ablation.
AFIB has proposed a competitive IPO price, enjoys strong support from investors to buy part of the IPO, and has posted good recent sales growth results in the midst of a rapid positive growth in the sector.
Carlsbad, California-based Acutus was founded to develop cardiac ablation tools including its AcQMap imaging and mapping system to assist in mapping the 'drivers and maintainers of arrhythmias.'
Arrhythmias occur when the heart beats too quickly and can result in fatigue, stroke and sudden death.
Management is led by Vince Burgess, president and chief executive, who has been with the firm as a board member since June 2013 and was previously a venture partner at the renowned life science venture capital company OrbiMed.
Below is a review video of the company's AcQMap system:
Source: Brad Klos
The firm announced the introduction of its AcQMap program in Q1 2020, as well as the addition of other devices.
Here is a summary of developments in the company:
Source: Company S-1 Filing
Investors in the firm have invested at least $148 million and include OrbiMed Advisors, Deerfield Management, Advent Life Sciences, AMXeraya, Revelation Alpine, and CVF 2018.
According to MarketsAndMarkets' 2020 market research report , the global cardiac ablation market is estimated to have expanded from 2014 to 2019 at a CAGR of 12.5 per cent.
The estimated value for all forms of heart ablation care in 2019 was around $883 million.
A rising elderly population increasing demand for treatments, increased awareness and continued technical advancement in the sector are key factors driving this overall growth.
Emerging market areas have demonstrated growth in demand, including countries including China, India , Brazil and Mexico.
Major vendors that provide or are developing treatments or related systems include:
- Abbott Laboratories
- Advanced Cardiac Therapeutics
- Alcon Laboratories
- Boston Scientific
Management says their system provides 'unmatched speed and precision' in mapping the arrhythmia drivers and maintainers.
Recent financial reports from Acutus indicate sales growth from a low base, as the company has only recently started to market its system.
Below are the company's financial results for the past two and 1/4 years (Audited PCAOB for full years):
Source: Company registration statement
As of March 31 , 2020, the company had $49.9 million in cash and $68.8 million in total liabilities, of which $38.4 million was long-term debt. (Interim (Unaudited)
Acutus plans to sell 7.35 million common stock shares at a midpoint price of $17.00 per share for about $125 million in gross proceeds, not including the selling of standard underwriter options.
Certain existing shareholders have indicated an interest to purchase shares of up to $45 million from the IPO. It is a clear indication of interest for the IPO from investors.
Given a successful IPO at the midpoint of the estimated price range, the enterprise value at IPO for the company will be around $407.2 million.
With the exception of the impact of underwriter options and private placement shares or limited stock, the float ratio to outstanding shares would be about 29.85%.
It plans to use the net proceeds as follows, according to the company's most recent regulatory filing:
We are currently planning to use the net proceeds from this offer as follows: approximately $40.0 million to support our commercial expansion, including hiring additional commercial staff, approximately $22.0 million to complete all of our ongoing clinical trials, including our RECOVER AF PMA, PLASZMA trial, IDE ablation catheter and DISCOVER registry, approximately $24.0 million.
Presentation of the company's roadshow by management is available here.
The IPO underwriters listed are J.P. Morgan, William Blair, BofA Securities, Canaccord Genuity, and BTIG.
Acutus is pursuing public investment for both continuing marketing activities and expanding its future TAM through additional product development.
However, the firm's growth trajectory has accelerated, with Q1 's result of $1.58 million in revenue, if annualized, would mean more than $6.3 million in 2020 sales.
Market prospects for cardiac ablation technologies have increased and are expected to continue growing as the U.S. and global population continues to age, increasing the incidence of cardiac arrhythmia.
Acutus is thus positioning itself to take advantage of the potential for growth.
J.P. Morgan is the lead left underwriter and the company-led IPOs have produced an average return of 60.8 percent since their IPO over the last 12-month period. It is a top quality success during the era for all major underwriters.
As for pricing, the proposed price of the IPO falls within the usual range for a life science company seeking public funding.
Considering the reasonable IPO price, strong investor interest to buy part of the IPO, the recent revenue growth results of the company and the growth prospects of the industry, my opinion on the IPO is a BUY of up to $17.00 per share.
Expected IPO Pricing Date: August 5, 2020.
(I have no position in any stocks mentioned as of the article date, no plans to initiate any positions within the next 48 hours, and no business relationship with any company whose stock is mentioned in this article. IPO stocks can be very volatile in the days immediately after an IPO. Information provided is for educational purposes only, may be in error, incomplete or out of date, and does not constitute financial, legal, or investment advice.)
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