IPO Watch: MAKO Surgical
www.makosurgical.com
Nasdaq: MAKO
Scheduled for the week of Feb. 11
$76.5 million estimated proceeds
$301.7 million estimated post-money valuation
Nothing cures arthritis like simply removing the troublesome joint and replacing it with a metal prosthesis. Hip and knee replacement surgery isn’t rare, but it isn’t simple, either: if there’s a problem, the patient may lose the use of that joint permanently. As the population ages, demand for joint replacement is likely to increase, so surgeons will want to find ways to handle the volume of surgery while ensuring that patients get the care they need.
MAKO Surgical has a different approach to knee replacement. The company uses a robotically guided surgical arm (using technology licensed from IBM (NYSE: IBM)) that works through a small incision in the knee. It resurfaces the trouble spot and installs a metal covering. This works best for people in the early stages of arthritis. The technology is FDA approved but very new. Six machines have been sold and 181 procedures have been performed commercially using this technique.
The financial results are just as early stage. For the nine months ended Sept. 30, 2007, MAKO posted just $355,382 in revenue (that’s 355 thousand, not million) and lost $13.2 million. One of the venture funders, Z-KAT, is selling a small amount of its position on the offering but will still control 7.02% of the shares after the IPO closes. Neither the other investors nor the officers are selling shares. The first $4 million of deal proceeds will go to IBM under the terms of the licensing agreement; the rest will be used to fund product marketing, research and development.
This IPO is on the calendar for the week of Feb. 11, but given that the IPO market is hobbled by the weak stock market, it may get pushed out a week or two — or more. After all, MAKO has interesting technology that meets a market need, but is still in its early stages and has a long history of losses. It might have been a hot deal in a healthy environment, but it’s not now.
Upcoming IPOs:
ArcSight (www.arcsight.com; Nasdaq: ARST; Feb. 11; $309.4 million post-money valuation): ArcSight makes software that helps companies better manage their information security. It creates a control screen that helps the IT staff at a large organization keep track of different threats and security events, including attempts to crack the network or test different passwords. The advantage is the ability to monitor disparate systems across several locations. The company’s largest investor is Kleiner Perkins Caulfield Byers, which will own 19% of ArcSight after the offering and which is not selling shares. For the six months ended Oct. 31, 2007, ArcSight lost $3.3 million on $37.6 million in revenue.
BCD Semiconductor Manufacturing (www.bcdsemi.com; Nasdaq: BCDS; Feb. 11; $234.5 million post-money valuation): If it weren’t for the Chinese, the U.S. IPO market would be even thinner than it is now. BCD is a Chinese manufacturer of analog devices used for power management in mobile phones, portable media players, LCD televisions and other modern electronic devices. Its customers, who include Sony Corporation (NYSE: SNE), Samsung, and Foxconn, generated $69.3 million in revenue for the nine months ended Sept. 30, 2007. It made money in that period, for the first time ever. Deal proceeds are earmarked for fabrication expansion and general corporate purposes.
Recent IPOs:
IPC The Hospitalist Company (www.thehospitalistcompany.com; Nasdaq: IPCM; Jan. 24; $212.6 million post-money valuation): IPC is a physician practice management company specializing in hospitalists, who are doctors that coordinate the care of hospital inpatients. This supplants work that is often done by the patient’s primary care physician. The group has 550 hospitalists working at 300 hospitals in 16 states. The company’s profitability has been spotty. For the nine months ended Sept. 30, 2007, IPC had revenue of $137.4 million and a loss of $3.7 million. That’s why deal proceeds went to pay off debt and fund general corporate purposes, as well as to lighten the exposure of the venture capitalists.
Williams Pipeline Partners L.P. (www.williamspipelinepartners.com; NYSE: WMZ; Jan. 17; $684.6 million post-money valuation): This is a master limited partnership organized by Williams Companies, Inc. (NYSE: WMP) to own and operate the Northwest Pipeline, a natural gas pipeline that starts in New Mexico and mostly serves Colorado, Idaho, Oregon and Washington, with a few underground storage facilities along the way. Williams has a 65% stake in the partnership, which is managed for dividends. The pipeline’s customers are utility companies and its revenues generated $49.2 million in profit for the first nine months of 2007. The initial distribution rate is set at $1.15 per unit per year.
About the Author
Ann C. Logue is a freelance writer and a lecturer in finance at the University of Illinois at Chicago.
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Feb 12 07:16pm
Father of daughter age 54, who has been on formal disability since 1989 knee surgery: My daughter had bothe knees operated on in 1989 as knee caps were no in proper alinement. Shs was in bed at home for six months before she was finally put on permanent disability and stillis. She was told that knee repacement was not an option until she was at least 65 years of age as the material available would not last more than 10to12 yearsand second surgery was unlikely. This procedure souds like a possible answer to our problem. She still lives at home with my wife and I walks with a crutch.We are both in our eighties and soon she will not have a home.Please let me know what you think. Duane E. Vittetoe vittetoel@aol.com
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