Medical Device Daily Executive Editor
And MDDs

Accuray (Sunnyvale, California), maker of the CyberKnife radiosurgery system, is the third med-tech company to stick its toe into the IPO waters this year.

The Accuray IPO follows that of CardioMEMS (Atlanta) (Medical Device Daily, Jan. 23, 2007) and Applied Digital Solutions (MDD, Feb. 6, 2007) — and not counting Xtent (Menlo Park, California), which in January amended an earlier IPO filing (MDD, Feb. 1, 2007).

The company will offer 13.3 million shares priced between $14 and $16, and about 2 million shares will be provided to cover over-allotments. Accuray expects proceeds of about $99.5 million, or about $105.2 million if the underwriters' over-allotment option is exercised in full. It plans to make the offer next week.

Accuray said it will use $40 million for sales and marketing of its CyberKnife, an FDA-cleared robotic radiation surgery system to treat tumors, and $30 million for R&D.

After the offering, the company will have a market cap of about $885 million.

The company's Cyberknife includes features for providing highly targeted radiation and is intended as an improvement over older radiosurgery systems with limited mobility, and used mostly to treat brain tumors. The CyberKnife can be used to treat tumors anywhere in the body. The procedure requires no anesthesia and can be performed on an outpatient basis.

The CyberKnife received FDA 510(k) clearance in July 1999 to provide treatment planning and image-guided robotic radiosurgery for tumors in the head and neck. The system received 510(k) clearance in 2001 to treat tumors anywhere in the body where radiation treatment is indicated. CyberKnife has received a CE mark and has been approved for various indications in Japan, Korea, Taiwan, China and other countries.

The company reports more than 20,000 patients worldwide treated with the CyberKnife system since its introduction, with increasing use for indications outside of the brain, including for tumors on or near the spine and in the lung, liver, prostate and pancreas. It said that more than 50% of patients treated with the system in the U.S. were treated for tumors outside the brain. The company says the CyberKnife can treat tumors untreatable via traditional techniques because of their location, number, size, shape or proximity to other vital tissues or organs. This ability is facilitated by a "manipulator" arm designed to move and direct the linear accelerator with a high level of precision, enabling radiation doses to be delivered from nearly any direction.

Accuray reports more than 80 Cyberknife systems installed in hospitals around the world, about 50 of them in the U.S.

Among the risks mentioned in the company's Securities and Exchange filing are:

• that the safety and effectiveness of the CyberKnife "for certain uses" has not been supported by long-term clinical data and that it "may not be as safe and effective as we currently believe it to be," and so "could slow the adoption of the system by physicians and significantly reduce our ability to achieve expected revenues;

• and that the company's accountants have identified weaknesses and deficiencies in its internal controls, "which could cause delays or inaccuracies in our financial reporting."

John Adler Jr., a neurosurgeon from Stanford University (Palo Alto, California), founded the company in 1990. It booked a loss of $34 million on revenue of $53 million for the 12 months ended in September.

JP Morgan and UBS are managing the IPO, with Piper Jaffray and Jefferies & Co. as co-managers.

Invacare (Elyria, Ohio) reported the pricing of $125 million principal amount of convertible senior subordinated debentures, due 2027, to be sold to institutional buyers.

The company also granted the initial purchasers a 30-day option to purchase up to another $10 million principal amount of the debentures to cover over-allotments, if any. Subject to customary conditions, the offering is expected to close on Feb. 12, 2007.

The debentures will be unsecured senior subordinated obligations of the company guaranteed by the company's domestic subsidiaries, will pay yearly interest of 4.125% per annum on each Feb. 1 and Aug. 1, and are convertible into cash, common shares of the company, or a combination thereof. The initial conversion rate will be 40.3323 shares per $1,000 of debentures, an initial conversion price of about $24.79 a share.

The last reported sale price of the company's common shares on Feb. 5 was $20.24 a share. The debentures will be redeemable at the company's option on or after Feb. 6, 2012, through Feb. 1, 2017, and at the company's option after Feb. 1, 2017. On Feb. 1, 2017, and 2022, holders will have the right to require the company to repurchase all or some of their debentures.

Invacare said it is negotiating a new financing program that is expected to result in $700 million and expected to include a senior secured revolving credit facility and term loans along with additional senior debt.

The company intends to use the net proceeds from the sale of the debentures, together with proceeds from other financings, to refinance its existing indebtedness and pay related fees and expenses.

Invacare manufactures and distributes home and long-term care products.

In other financing activity:

Conceptus (Mountain View, California) reported that it will offer $75 million of convertible senior notes, due 2027, convertible to a combination of cash and Conceptus stock.

Upon conversion, the holder of each note would receive cash up to the principal amount of the note and Conceptus common stock for the note's conversion value in excess of such principal amount. Conceptus said it will grant the underwriter a 30-day option to purchase up to another $11.25 in convertible senior notes to cover any over-allotments.

It also expects to enter into convertible note hedge transactions with certain dealers to reduce the potential dilution upon conversion of the notes.

The company said it will use a portion of the net proceeds from the offering of the note, together with the proceeds from warrant transactions, to fund the cost of the convertible note hedge transactions.

The company intends to use some of the net proceeds for working capital and/or possible acquisitions of other businesses, technologies or products.

UBS Investment Bank is acting as sole book-running manager in connection with the offering.

Conceptus, manufactures the Essure Permanent Birth Control system, a medical device and procedure for a non-incisional alternative to tubal ligation.