AGA Medical (Plymouth, Minnesota) plans to go public, according to its recent filing with the Securities and Exchange Commission.
AGA did not disclose the expected size or price of its initial public offering, but indicated that it could raise up to $200 million.
The company makes a variety of occlusion devices that are designed to work like stoppers to plug structural heart defects and abnormal blood vessels. AGA reported receiving CE-mark approval to market its Amplatzer Vascular Plug III in May (Medical Device Daily, May 20, 2008) and for its Amplatzer Duct Occluder II in February (MDD, Feb. 13, 2008).
AGA has all of its manufacturing, R&D operations, as well as most of its sales, warehousing and administrative activities, in Plymouth, the company said in the SEC filing. AGA employed 335 people as of March.
Net sales at AGA have grown at a compounded annual rate of 22.5% from 2005 to 2007, according to the filing. Last year, AGA had revenue of $147.3 million, and reported sales of $36.8 million during 1Q08, the company said. It reported net income of $6.1 million in 2007 and $500,000 for 1Q08.
According to the filing, the company's lead family of products, the Amplatzer Septal Occluders represented roughly 57.4% of its net sales for the three months ended March 31, and the company expects these products to continue to account for a substantial portion of its net sales for the next few years. If sales of the Amplatzer Septal Occluders were to decline it would negatively affect the business, financial condition, and results of operation, the company said in the filing as a possible risk factor to investing in its common stock.
The chairman of AGA's board is Tommy Thompson, who served four terms as the governor of Wisconsin between 1987 and 2001 before serving as secretary of Health and Human Services between 2001 and 2005.
"There's no question that there's a lot of capital still on the sidelines. They have revenue, and real revenue is the best way through a difficult market," said Dan Carr, CEO of the Collaborative, a networking group that tracks IPOs in Minnesota.
In addition to the company's existing products, AGA has plans for new products in three key areas, according to the filing.
AGA is developing a treatment for a common structural heart defect called patent foramen ovale (PFO) that increasingly has been linked to certain types of strokes and migraines. By closing the PFO with an occlusion device, the company says, doctors may be able to reduce the incidence of these strokes and migraines.
The market opportunity for PFO closure in the U.S. and Europe is greater than $1 billion a year, AGA estimates. AGA's competitors in this area include NMT Medical (Boston) and W.L. Gore & Associates (Flagstaff, Arizona).
Also, Cardica (Redwood City, California) and Cook Medical (Bloomington, Indiana) last year agreed to develop a PFO closure device together (MDD, June 20, 2007).
AGA also is developing a device to occlude the left atrial appendage, a thumb-sized sack of tissue on the heart that has been linked with an increased stroke risk for patients with atrial fibrillation. Atritech (also Plymouth), a clinical-stage company, also is developing a device that would reduce the stroke risk by preventing clots from leaving the appendage.
The third area for possible growth, AGA says, is development of vascular grafts to treat aneurysms.
Earlier this month, the U.S. Department of Justice said AGA would pay a $2 million criminal penalty in connection with payments to Chinese government officials. The government said AGA worked between 1997 and 2005 with a Chinese distributor who provided kickbacks to doctors for purchasing AGA products, and made payments to a government official to help the company win patents (MDD, June 5, 2008).
The company initiated the investigation that ultimately resulted in the penalty, and disclosed that investigation to the DOJ in July 2005, according to an earlier SEC filing. In recognition of the self-reporting and subsequent reforms at the company, the government reached a deferred prosecution agreement with AGA in which the DOJ said it would delay prosecuting for three years and could dismiss it entirely if the company abides by the agreement during that time.
Thompson has served as chairman and a director of the company's board since August 2005. The SEC filing shows Thompson received total director compensation in 2007 of $495,674, which included option awards valued at $310,674, cash compensation of $100,000 and $85,000 as the second of three installments of a retention bonus.
In July 2005, the company entered into a five-year independent contractor agreement with Thompson. AGA agreed to pay an annual retainer of $120,000 to the law firm Akin Gump Strauss Hauer & Feld, where Thompson has served as a partner since March 2005.
AGA was founded in 1995 by Franck Gougeon and Kurt Amplatz, MD. John Barr was named CEO of the company this month, taking over from Gougeon. Barr had been COO of AGA since 2005 (MDD, June 23, 2008).
According to the SEC filing, proceeds from the IPO would be used to make principal, interest, debt and dividend payments, with any remaining proceeds going to working capital and general corporate purposes.
The company's stock would trade on the Nasdaq under the symbol AGAM.
The underwriters for the company's offering are Citigroup Global Markets, Deutsche Bank Securities, Lehman Brothers, Banc of America Securities, Wachovia Capital Markets, Piper Jaffray & Co. and Leerink Swann.
In other financing activity, Broncus Technologies (Mountain View, California), a developer of minimally invasive devices for emphysema and other lung diseases, said it has canceled a planned $86.25 million IPO due to "current public market conditions."
Lehman Brothers and Bear Stearns had been serving as co-lead underwriters.
Broncus has raised about $73 million in funding since 1997 from firms such as Menlo Ventures and Abingworth Management.
Last year the company reported starting its Exhale Airway Stents for Emphysema (EASE) trial to explore an investigational procedure called airway bypass, which uses drug-eluting stents to keep the new pathways in the lung open for trapped air to escape. This in turn, may relieve severe emphysema symptoms such as shortness of breath, Broncus said (MDD, July 5, 2007).