IPO Report: Amedica (AMDA)

Francis Gaskins  |

Amedica (AMDA) is a commercial biomaterial company focused on using its silicon nitride technology platform to develop, manufacture and sell a broad range of medical devices.

Seven other companies are scheduled for the week of February 10, 2014.  The full IPO calendar is available at IPOpremium.

The manager and joint managers are JMP Securities.  The co-managers is Needham & Co.   SEC Filings

AMDA scheduled a $35 million IPO with a market capitalization of $125 million at a price range midpoint of $11 for Thursday, February 13, 2014, on the Nasdaq. 

AMDA currently markets spinal fusion products and is developing products for use in total hip and knee joint replacements.

Expected growth -- ADMA’s silicon nitride technology platform helps produce innovative products for large addressable markets (see below); that’s the source of the expected growth.

The company has an exisiting distribution system in place for the new products.

For the nine months ended September ’13 revenue as $16.6 million, gross profit was 69% and operating loss was $7.4 million.



Valuation Ratios


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Amedica (AMDA)








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The rating on ADMA is avoid but watch: too small and the current loss rate is too large.  70% of current revenue comes from legacy products.  Expected growth is based on unique silicon nitride technology products whichresult in faster and more effective fusion and reduced risk of infection.

The addressable markets are large (see below).

AMDA is a commercial biomaterial company focused on using its silicon nitride technology platform to develop, manufacture and sell a broad range of medical devices.

AMDA currently markets spinal fusion products and is developing products for use in total hip and knee joint replacements.

AMDA believes its silicon nitride technology platform enables it to offer new and transformative products in the orthopedic and other medical device markets.

Non-silicon products
In addition to silicon nitride-based spinal fusion products, AMDA markets a complementary line of non-silicon nitride spinal fusion products which allows AMDA to provide surgeons and hospitals with a broader range of products.

These products include three lines of spinal fusion devices and five types of orthobiologics, which are used by surgeons to help promote bone growth and fusion in spinal fusion procedures.

Expected growth from silicon products
Although non-silicon nitride products have accounted for approximately 70% or more of product revenues for the years ended December 31, 2012 and 2011 and the nine months ended September 30, 2013, AMDA believes the continued promotion and potential for adoption of  silicon nitride products and product candidates, if approved, provides the greatest opportunity to grow our business in new and existing markets and achieve our goal to become a leading biomaterial company.

First and only
AMDA believes it is the first and only company to use silicon nitride in medical applications and over 14,000 of its intervertebral fusion devices have been implanted in patients.

AMDA currently markets its Valeo MC2 silicon nitride interbody spinal fusion devices in the United States and Europe for use in the cervical and thoracolumbar areas of the spine.

AMDA believes its Valeo devices have a number of advantages over existing products due to silicon nitride’s key characteristics, resulting in faster and more effective fusion and reduced risk of infection.

AMDA’s first generation Valeo silicon nitride device received 510(k) regulatory clearance and a CE Mark in 2008.

Based on surgeon feedback, AMDA developed a second generation of Valeo products with design enhancements that improve surgeon control during implantation and stability post procedure.

Surgeon collaboration
In the first half of 2013, AMDA initiated a Design and Build Program focused on collaborating with influential surgeons to develop customized silicon nitride spinal fusion products and instruments and the first products designed under this program were sold in the third quarter of 2013.

Full 2nd generation Valeo launch first half of 2014
Earlier this year, AMDA initiated a targeted launch of its second generation Valeo interbody fusion devices and expects to complete the full launch in the first half of 2014.

Composite silicon nitride interbody fusion devices
AMDA  also markets its Valeo composite interbody spinal fusion device made from both its solid MC2 and porous CSC silicon nitride in the Netherlands, Spain and Germany.

AMDA is currently conducting a prospective clinical trial in Europe, called CASCADE, comparing its Valeo composite silicon nitride interbody devices to PEEK interbody devices, from Medtronic (MDT) $55.5 billion market cap, to obtain additional data to support 510(k) clearance in the United States.

The trial is 100% enrolled. AMDA expects results to be available in the second half of 2014.

If this trial is successful, AMDA plans to file a 510(k) submission with the FDA by mid-2015.

Addressable markets
AMDA’s products and product candidates target the interbody spinal fusion and total hip and knee joint replacement markets. According to iData Research, Inc., in 2012, the markets for spinal implants in the United States and in combined major European markets were $5.3 billion and $1.0 billion, respectively.

Interbody spinal fusions accounted for over $1.2 billion and $172.2 million of these markets, respectively.

Additionally, Orthopedic Network News reported that the U.S. markets for the components of total hip and knee replacement product candidates that we are initially developing were $455.0 million and $1.5 billion, respectively.

AMDS markets and sell its products to surgeons and hospitals in the United States and select markets in Europe and South America through an established network of more than 50 independent sales distributors.

A substantial portion of product revenue has historically been derived from sales in the United States.

The largest customer, Bon Secours St. Mary’s Hospital, accounted for 17% and 14% of product revenues for the years ended December 31, 2011 and 2012, respectively, and 15% of product revenues for the nine months ended September 30, 2013.

A significant portion of this hospital group’s purchases from AMDA are non-silicon nitride products and its accounts receivable balance was approximately 11% of total trade accounts receivable at September 30, 2013.

Intellectual property

AMDA currently has 34 issued U.S. patents, 38 pending U.S. patent applications, 11 granted foreign patents and 18 pending foreign patent applications. Its issued patents begin to expire in 2014, with the last of these patents expiring in 2031. The first core patents do not expire until 2022; these include US 6,881,229 and US 6,790,233.

AMDA has seven U.S patents, one European patent, and related pending applications, directed to articulating implants using its high-strength, high toughness doped silicon nitride MC2 ceramic. The issued patents, which include US 6,881,229; US 7,666,229; US 8,123,812; US 7,780,738; US 7,695,521; US 7,776,085; US 8,133,284; and EP 1408874, begin to expire in 2022. AMDA also have two U.S. patents, two European patents, and related pending applications, related to its CSC technology that are directed to implants that have both a dense load-bearing, or cortical, component and a porous, or cancellous, component, together with a surface coating. The issued patents, which include US 6,790,233; US 6,846,327; EP 1389978; and EP 2055267, begin to expire in 2022.


AMDA believes its main competitors in the orthopedic implant market, which utilize a variety of competitive biomaterials, include: Medtronic, Inc.; DePuy Synthes Companies, a group of Johnson & Johnson companies; Stryker Corporation; Biomet, Inc.; Zimmer Holdings, Inc.; Smith & Nephew plc; and Aesculap Inc.

Presently, these companies buy ceramic components on an OEM basis from manufacturers such as CeramTec, Kyocera and CoorTek, Inc., among others.

AMDA anticipates that these and other orthopedic companies and OEMs will seek to introduce new biomaterials and products that compete with AMDA’s products.

5% stockholders                       

Hampshire Group, LLC  17.7%

Allan R. Lyons   6.0%                

Kevin Murphy    5.8%    

Use of proceeds

AMDA expects to net $28.3 million from its IPO. Proceeds are allocated as follows:

up to $14.1 million to fund research and development and commercialization activities of its product candidates, including the funding of clinical trials AMDA plans to conduct for its product candidates;

up to $8.7 million to support working capital needs and other general corporate purposes, including debt service under its existing GE Secured Lending Facility; and         

up to $5.5 million to continue to build sales, marketing and distribution capabilities for its silicon nitride technology platform, including the costs of inventory and instruments.

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