Medical Device Daily European Editor

PARIS – The hot market for initial public offerings (IPOs) expected for medical technology companies this year on the French-based Alternext and Euronext stock exchanges is stalled as investors nervously await the outcome of the rescue of Greece.

All eyes are on the launch of Mauna Kea Technologies (Paris) this week as it gathers subscribers toward a July 4 closing on the Euronext exchange (Medical Device Daily, June 23, 2011).

Mauna Kea is considered a high quality offering with two FDA-approved versions of its Cellvizio endoscopic microscope that allow direct cellular-level imaging of tissue to improve the diagnosis of cancer in the gastro-intestinal and pulmonary tracts.

The company presented findings from a prospective multicenter study at Digestive Disease Week in Chicago in May, 2011, that showed the sensitivity of probe-based confocal laser endomicroscopy for predicting disease was 98% compared to 45% sensitivity for conventional tissue sampling with biopsies (MDD, May 16, 2011).

Founded in 2000, the company hopes to raise at least €41.2 million on the NYSE Euronext exchange to finance an "ambitious strategy to become the in vivo microscopic imaging leader," that include both expanded sales and marketing capabilities and new clinical trials to validate the use of existing products for new diseases.

Also going forward with an IPO that close its pricing on July 4 is a Visiomed Group (Paris), positioned as an consumer-oriented electronic medical lab.

Founded in 2007 the company reached over €10 million ($14.38) in sales for 2010 but is still burning cash reporting a €2 million ($2.86 million) loss. In the first four months of 2011 sales were still growing at 25%.

Visiomed's flagship product is ThermoFlash, a novel non-contact infrared thermometer sold over-the-counter in pharmacies. Other products include automatic blood pressure meters, pain treatment devices, and self-diagnostic devices, all sold through pharmacies.

Meanwhile, Vexim (Toulouse, France), the maker of a novel spine implant, reported this week it will postpone its IPO until 3Q11.

"It would be better to wait and have Greece behind us," said Philippe Pouletty with Truffle Capital (Paris), which has backed the company's development to this point and is seeking an exit on the public market.

"Investors know they can make money in IPOs, they understand that the health sector is a very good position in difficult economic times, so perhaps if they have a good summer vacation and if Greece is no longer an issue, then they will be ready to invest more in the fall," he told MDD.

The bullish mood for IPOs on European stock exchanges was fueled by a strong surge in the second half of 2010 led by artificial heart maker Carmat and Stentys both located in Paris (MDD, January 12, 2011).

Both companies have continued to perform well in their first year.

The valuation of Carmat skyrocketed from a post-IPO capitalization of €75 million ($107 million) to almost €700 million ($1 billion) currently, while Stentys has increased its stock price 65% from €12 ($17) to almost €20 ($28.65) giving it a capitalization today of €143 million ($205 million).

The reopening of the Alternext and Euronext markets for IPOs followed a two-year drought that dried up the public pool for replenishing private equity investment that is a critical resource for innovative companies (MDD, June 27, 2011).

Yet just as companies prepared to take the plunge with an IPO in 2011, the waters were troubled by the Japanese tsunami and then the tremors of a potential default by Greece that could shake banks across the Eurozone to their foundations.

The French daily newspaper Le Figaro called 1Q11 "disappointing" for IPOs, noting the pipeline that quickly filled with candidates has been stopped up by uncertainty.

Ernst & Young reports that as European investors regained their risk appetite the IPO revival achieved the highest volume since 2007 and a startling 395% rise from the low point reached in 2009.

Where Europe has contributed an average of 25% of IPO fundraising worldwide, the 2010 volumes accounted for just 13% of global capital raised and the subsequent market jitters resulted in numerous withdrawals, postponements or else highly discounted valuations and pricing pressure on those companies that have gone forward, Ernst & Young reported.

Median takes the middle road to IPO

A highly unusual entry into the Alternext exchange was made by Median Technologies (Valbonne, France), developer of a lesion management software for comparing computed tomography scans of patients undergoing chemotherapy.

In mid-May, the company entered the public market with an offer restricted to private investors that raised €10 million ($14.5 million) primarily from its historic venture partners Draper Fisher Jurvetson ePlanet Ventures (San Jose, California), Idinvest Partners-AGF Private Equity (Paris) and Auriga Partners (Paris).

"We did not seek a visa to open to individual investors to be sure that we avoided some of the volatility we have seen since, for example with Greece," CEO Fredrik Brag told MDD.

He said the company expects to open its shares to public trading before the end of the year, but that for the moment he is enjoying the stability of the trading restricted to "qualified investors."

Volatility caused by individual traders can be beneficial, he said, citing the valuations of Carmat and Stentys that have won investor confidence.

"The downside is that it can fall flat just as quickly as it went up should conditions change," he said.

"I believe in gambling, but I like controlled gambling," he said.

Despite restrictions, approximately a fourth of Median's shares are traded in blocks among investment groups and Brag said he is pleased to see the share price has climbed from €9.75 ($14) to €12.55 ($18), giving the company a current valuation of €70 million ($100 million).

Brag reports the current revenue stream is "modest" at €1.1 million ($1.57 million) but he and his investment partners are looking toward a further horizon, targeting the estimated $2 billion spent by pharmaceutical companies each year for medical imaging related only to cancer.

This month Median announced a new package aimed at this market called Clinical Trial Imaging Services that builds on the company's lesion management software that standardizes radiology reporting for tumor progression. (MDD, Jan 26, 2011)

The quantitative management of treatment responses using CTIS has already attracted contracts with five big pharmaceuticals for imaging related to their clinical trials, Brag said in an interview with the French online service EasyBourse,.

"According to the official numbers only 20% of patients under treatment respond positively to chemotherapy, " he said.

"This creates a tremendous problem for pharma companies, notably in phase III clinical trials where they are already spending hundreds of millions," he said.

"CTIS opens the potential for personalizing patient studied and to realize significant savings for pharma companies," he explained.

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