Device IPO Class of 2007 Making News, Some Returns

Article preview from Start-Up - March 01, 2011

The merger of Accuray and TomoTherapy would combine two of the 11 medical device companies that went public in 2007, a class of companies that has produced mixed results.

Device IPO Class of 2007 Making News, Some Returns

Article preview from Start-Up - March 01, 2011

By Tom Salemi

Accuray Inc.'s bid to acquire TomoTherapy Inc. would bring together two companies with complementary radiation-based treatments for cancer. The deal – valued at $277 million – would also combine two of the 11 medical device companies that succeeded in going public in 2007, the last year the sector had a respectable chance to go public.

The merits of the Accuray-TomoTherapy deal will be weighed by shareholders on both sides. But a review of those 11 companies shows their performance is decidedly mixed. Only five of the 11 will still be publicly held when and if the deal for TomoTherapy closes. Two of those five – cardiovascular company Masimo Corp. and insulin pump maker Insulet Corp. – are faring well, sporting shares with prices in the double-digits. Shares in Accuray, gastrointestinal-oriented EnteroMedics Inc. and spine company TranS1 Inc. all are trading in single numbers. It's no surprise then that only those two of the five – Masimo and Insulet – are valued higher today than they were on the day of their IPOs, according to Elsevier's Strategic Transactions. This is an unfortunate trend. Of the six IPO companies that were acquired by strategic partner, and – in the case of Virtual Radiologic Corp. – a financial buyer, only Virtual Radiologic and SenoRx Inc., maker of breast cancer diagnostics (and now a division of CR Bard Inc.), commanded prices that were higher than their valuations immediately after their IPOs.

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