IPO Report: Avinger (AVGR)

Francis Gaskins |

Avinger IPO, Avinger IPO date, Avinger IPO price, IPOs this week, stocks to buy now, small-cap stocksBased in Redwood City, CA, Avinger (AVGR) is a commercial-stage medical device company that designs, manufactures and sells image-guided, catheter-based systems that are used by physicians to treat patients with peripheral arterial disease, or PAD.  The company is based in Redwood City, CA.

Eleven other companies are scheduled to IPO for the week of Jan. 26, 2015. The full IPO calendar is available at IPOpremium.

AVGR scheduled a $60 million IPO with a market capitalization of $128 million at a price range midpoint of $13 for Friday, Jan. 30, 2015 on Nasdaq. SEC Documents

Manager, Joint-managers: Canaccord Genuity and Cowen and Company

Co-managers: Oppenheimer, BTIG, and Stephens

Avinger IPO Overview

Patients with PAD have a build-up of plaque in the arteries that supply blood to the arms and legs. AVGR’s mission is to dramatically improve the treatment of vascular disease through the introduction of products based on its lumivascular platform, the only intravascular image-guided system available in this market.

Avinger IPO Valuation

Glossary

Accumulated deficit (mm)

.

.

-$138

     

Per share dilution

.

.

-$9.33

     

-----------------------------------------------------------------------

     

Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

annualizing Sept 9 mos

         

Avinger (AVGR)

$128

11.9

-4.0

3.6

3.5

47%

             

Avinger IPO: Conclusion

Neutral

Rev -15%         

Gross profit 39%          

FDA 510(k) submission 2nd half of '15  

Very high cash burn rate relative to market cap:  P/E -4  

Price-to-book of 3.6     

No insider indicatiions to purchase on the IPO   

To put the conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced above.

Avinger Business

AVGR is a commercial-stage medical device company that designs, manufactures and sells image-guided, catheter-based systems that are used by physicians to treat patients with peripheral arterial disease, or PAD.

Patients with PAD have a build-up of plaque in the arteries that supply blood to the arms and legs. AVGR’s mission is to dramatically improve the treatment of vascular disease through the introduction of products based on its lumivascular platform, the only intravascular image-guided system available in this market.

AVGR manufactures and sells a suite of products in the United States and select European markets. AVGR’s current products include its Lightbox imaging console, as well as its Wildcat, Kittycat, and the Ocelot family of catheters, which are designed to allow physicians to penetrate a total blockage in an artery, known as a chronic total occlusion, or CTO.

AVGR is also developing Pantheris, its image-guided atherectomy device, designed to allow physicians to remove arterial plaque in PAD patients with precision.

AVGR expects its "revenues to increase as we continue to expand our sales and marketing infrastructure and introduce new lumivascular platform products including, if cleared by FDA, Pantheris."

Avinger Clinical Trials

Pantheris is currently undergoing a U.S. clinical trial intended to support a 510(k) submission in the second half of 2015 to the U.S. Food and Drug Administration, or FDA.

AVGR believes that Pantheris, if cleared by FDA, will significantly enhance its market opportunity within PAD and can expand the overall addressable market for PAD endovascular procedures.

Avinger Market

According to an article published in The Lancet, the global prevalence of PAD was estimated at 202 million people in 2010.

The prevalence of PAD in the United States alone was estimated at 18 million people in 2010 and is projected to grow to 21 million people by 2020 according to the Sage Group.

Despite its prevalence, PAD is underdiagnosed and undertreated relative to many other serious vascular conditions, including coronary artery disease, or CAD, in part because many PAD patients are asymptomatic or dismiss their symptoms as normal signs of aging.

Despite the relative undertreatment of PAD, Millennium Research Group estimates that over 570,000 catheter-based PAD procedures in the pelvis and legs were performed in the United States in 2013, which corresponded to a $1.0 billion market.

Millennium Research Group also estimates that the number of catheter-based PAD procedures will grow to almost 700,000 in 2017, representing a $1.2 billion market in the United States.

Higher diagnosis and intervention rates resulting from greater physician and patient awareness of PAD, as well as higher prevalence, may significantly expand the market opportunity for PAD treatments, according to the Millennium Research Group.

Current treatments for PAD, including bypass surgery, can be costly and may result in complications, high levels of post-surgery pain and lengthy hospital stays and recovery times.

Minimally invasive, or endovascular, treatments include stents, angioplasty, and atherectomy devices, which are catheter-based products for the removal of plaque.

These treatments also have limitations in their safety or efficacy profiles and frequently result in recurrence of the disease, also known as restenosis.

AVGR believes one of the main contributing factors to high restenosis rates for PAD patients treated with endovascular technologies is the amount of vascular injury that occurs during an intervention.

Specifically, these treatments often disrupt the membrane between the outermost layers of the artery, which AVGR refers to as the black line.

Avinger Intellectual property

As of December 31, 2014, AVGR held five issued U.S. patents and had 14 U.S. utility patent applications and 8 PCT applications pending.

As of December 31, 2014, AVGR also had one issued patent from the Japan Patent Office, one issued patent from the Chinese patent office, and one European patent which has been nationalized in Germany, France, Great Britain, Italy and Ireland. As of December 31, 2014, AVGR had 29 pending patent applications outside of the United States, including in Australia, Canada, Europe, India and Japan.

As AVGR continues to research and develop AVGR Pantheris technology, AVGR intends to file additional U.S. and foreign patent applications related to the design, manufacture and therapeutic uses of AVGR atherectomy devices. AVGR’Sissued patents expire between the years 2028 and 2032.

Avinger Competition

AVGR’s products compete with a variety of products or devices for the treatment of PAD, including other CTO crossing devices, stents, balloons and atherectomy catheters, as well as products used in vascular surgery.

Large competitors in the CTO crossing, stent and balloon market segments include Abbott Laboratories, BARD, Boston Scientific, Cook Medical, Covidien, Johnson & Johnson and Medtronic.

Competitors in the atherectomy market include Boston Scientific, Cardiovascular Systems, Covidien, Spectranetics and Volcano.

Some competitors have attempted to combine intravascular imaging with atherectomy and may have current programs underway to do so.

These and other companies may attempt to incorporate on-board visualization into their products in the future.

Other competitors include pharmaceutical companies that manufacture drugs for the treatment of symptoms associated with mild to moderate PAD and companies that provide products used by surgeons in peripheral and coronary bypass procedures.

Avinger 5% shareholders pre-IPO

Entities affiliated with John B. Simpson              22.54%

Funds affiliated with Lucas Venture Group          11.66%

PV 1114, LLC    7.61%

Black Diamond Ventures, XVIII, LLC       6.93%

Emergent Medical Partners II, LP            6.38%

Jeffrey M. Soinski         7.91%

John B. Simpson, Ph.D., M.D.   30.63%

Thomas J. Fogarty, M.D.           6.68%

Donald A. Lucas           12.00%                        

Avinger Dividends

No dividends are planned.

Avinger IPO Use of proceeds

AVGR expects to receive $52 million from its IPO and use it for the following:

for working capital and other general corporate purposes, including payment of scheduled interest and principal on AVGR’s credit facility with PDL Biopharma, or the credit agreement.

As of September 30, 2014, AVGR had $21.4 million in principal and interest outstanding under the credit agreement.

The interest rate under the credit agreement is 12.0% per annum plus a 1.8% royalty on net revenues and the interest rate under the notes is equal to the 30-day LIBOR plus 6% per annum.

During 2015 AVGR expects to use $2.0 million to make scheduled principal payments under the credit agreement.

As of September 30, 2014, AVGR had $12.4 million in principal plus accrued interest outstanding under the convertible promissory notes.

While AVGR does not have any current plans to allocate the net proceeds of this offering for the redemption of these notes, if AVGR does redeem the notes AVGR would pay each holder an amount equal to the greater of (i) 125% of the principal, and accrued and unpaid interest, or (ii) the principal plus an amount equivalent to a 20% annual return on investment under such notes.

Disclaimer: This AVGR IPO report is based on a reading and analysis of AVGR’s S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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