A Medical Device Daily

Thermage (Hayward, California) has priced it upcoming initial public offering (IPO), saying it will sell 6 million shares in the range of $11 to $13 a share, thus potentially raising $78 million.

The company made its original IPO filing this summer (Medical Device Daily, Aug. 14, 2006), saying it could raise up to $86 million.

The company will grant an option to the underwriters to purchase up to another 15% of the shares offered to cover over-allotments. It plans to list on the Nasdaq under the symbol THRM.

Thermage manufactures devices for the non-invasive treatment of wrinkles, in a procedure that can be performed, it says, “on any part of the body where treatment of wrinkles is desired.”

The company’s ThermaCool system uses monopolar radio frequency (RF) energy to heat and shrink collagen and tighten the epidermis and subcutaneous tissue while simultaneously cooling and protecting the surface of the skin, offered as an alternative to more complex and time-consuming surgical procedures. The heating and shrinking of the collagen causes a healing process that may further tighten the skin and reduce wrinkles over the next two to six months.

The company introduced its ThermaCool system in 2002, and said in its recent Securities and Exchange Commission filing that sales of the system “will account for substantially all of our revenue for the foreseeable future.”

It said that it plans to expand its line of ThermaTips systems — specifically, a treatment delivering a controlled amount of energy to heat collagen in the deeper layers of the skin and underlying tissue — for new applications in the near future but offers no assurance that this will happen.

Its systems are marketed in the U.S. to physicians through a direct sales force and internationally in 70 countries through a network of distributors. The sales force provides training in how to use the system.

The company says that 44% of its revenue in 2005 and 48% of its revenue for the first six months of 2006 were in international sales and that a significant portion of its business will comes from international sales and that it expects increased penetration overseas. But it notes that international markets are subject to a number of risk and variables difficult to control.

Among the risks listed in its SEC filing, the company notes that most of the ThermaCool procedures have been used on the face with its first-generation ThermaTip and that there are no published, peer-reviewed studies regarding the effectiveness of its latest generation 0.25 cm2 and 3.0 cm2 ThermaTips, or its most recent procedure protocol, or for procedures on other parts of the body.

Additionally, it has not conducted any head-to-head clinical studies that compare ThermaCool to other aesthetic devices.

The filing said: “If we decide to pursue additional studies in the future, they could be expensive and time-consuming, and the data collected may not produce favorable or compelling results. If the results of such studies do not meet physicians’ expectations, our ThermaCool system may not become widely adopted, physicians may recommend alternative treatments for their patients.”

Among other risks, it notes that the cooling module of the system relies upon a hydrofluorocarbon to protect the outer layer of the skin from over-heating while the RF energy is delivered. And it says that it may have difficulty developing an alternative cooling system in response to new environmental regulations.

It also notes that “third parties have introduced adulterated after-market modifications to our ThermaTips which have enabled re-use of our ThermaTips in multiple procedures. Because our ThermaTips are designed to withstand a finite number of firings, modifications intended to increase the number of firings could result in patients injuries ... It reports that as of June 30 it had installed more than 1,800 ThermaCool RF generators and sold in excess of 275,000 ThermaTips, representing, it said, “an about equal number of Thermage procedures performed.”

It notes the increasing number non-invasive aesthetic procedure and says that skin tightening is the fastest growing sector of this market, projected to grow at a 31% rate over the next five years.

Thermage had a loss of $6.6 million in 2003; a profit of $5 million in 2004; a loss of $8.2 million in 2005; and a loss of $3.8 million in the six months ended June 30.

Merrill Lynch, Pierce, Fenner & Smith will be the sole bookrunning manager for the IPO. Thomas Weisel Partners, Wachovia Capital Markets, C.E. Unterberg, Towbin and Maxim Group will be co-managers.

In other financing news:

• MedCath (Charlotte, North Carolina) reported the pricing of its public offering of 4.5 million shares of common stock, 1.7 million of which are being sold by the company and 2.8 million of which are being sold by certain selling stockholders, at $25.00 per share.

The selling stockholders have granted the underwriters the right to purchase up to an additional 675,000 shares at the public offering price. The company said it will not receive any proceeds from the sale of shares by the selling stockholders.

MedCath is focused on the diagnosis and treatment of cardiovascular disease. MedCath owns interests in and operates 11 hospitals with a total of 667 licensed beds, in Arizona, Arkansas, California, Louisiana, New Mexico, Ohio, South Dakota, and Texas. In addition, it manages the cardiovascular program at various hospitals operated by other parties. Further, it provides cardiovascular care services in diagnostic and therapeutic facilities in various states.

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