IPO Report: ConforMIS (CFMS)

Francis Gaskins |

ConforMIS (CFMS) is a medical technology company that uses its proprietary iFit Image-to-Implant technology platform to develop, manufacture and sell joint replacement implants that are individually sized and shaped, which CFMS refers to as customized, to fit each patient's unique anatomy. It is based in Bedford, MA.

Three other companies are scheduled for the week of June 29. The full IPO calendar is available at IPO Premium.

SEC Documents

Manager, Joint-managers: J.P. Morgan, Deutsche Bank Securities
Co-managers: Wells Fargo Securities, Canaccord Genuity

End of lockup (180 days): Monday, December 28, 2015
End of 25-day quiet period: Monday, July 27, 2015

CFMS scheduled a $135 million IPO a market capitalization of $586 million at a price range midpoint of $15 for Wednesday, July 1, 2015 on Nasdaq.

ConforMIS Summary

CFMS is a medical technology company that uses its proprietary iFit Image-to-Implant technology platform to develop, manufacture and sell joint replacement implants that are individually sized and shaped, which CFMS refers to as customized, to fit each patient's unique anatomy.

ConforMIS Valuation

Glossary

Accumulated deficit (mm)

.

.

-$282

     

Per share dilution

.

.

-$11.00

     
             

Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

ConforMIS (CFMS)

$585

9.9

-10.3

3.7

3.8

23%

             

ConforMIS Conclusion

Neutral plus

Q1 rev +36%

30% gross profit

Loss is -97% of rev

P/E is -10 indicating fairly heavy cash burn relative to market cp

Price to book of 3.7

ConforMIS Business

CFMS is a medical technology company that uses its proprietary iFit Image-to-Implant technology platform to develop, manufacture and sell joint replacement implants that are individually sized and shaped, which CFMS refers to as customized, to fit each patient's unique anatomy.

ConforMIS Market

The worldwide market for joint replacement products is approximately $15 billion annually and growing, and CFMS believes its iFit technology platform is applicable to all major joints in this market.

ConforMIS Customized knee implants

CFMS believes it is the only company offering a broad line of customized knee implants designed to restore the natural shape of a patient's knee.

CFMS has sold a total of more than 30,000 knee implants in the United States and Europe. In recent clinical studies, iTotal CR, CFMS’s cruciate-retaining total knee replacement implant and best-selling product, demonstrated superior clinical outcomes, including better function and greater patient satisfaction compared to off-the-shelf implants.

CFMS recently initiated the limited launch of iTotal PS, its posterior-stabilized total knee replacement implant which addresses the largest segment of the knee replacement market.

CFMS expects to submit an application for clearance of iTotal Hip, its first customized hip replacement implant, with the U.S. Food and Drug Administration, or FDA, in 2015.

ConforMIS Three Key Technology Platform Elements

CFMS’s iFit technology platform comprises three key elements:

iFit Design, CFMS’s proprietary algorithms and computer software that it uses to design customized implants and associated single-use, patient-specific instrumentation, which CFMS refers to as iJigs, based on a computed tomography, or CT, scan of the patient and to prepare a surgical plan customized for the patient that CFMS calls iView.

iFit Printing, a three-dimensional, or 3D, printing technology that CFMS uses to manufacture iJigs and are in the process of extending to manufacture certain components of its customized knee replacement implants.

iFit Just-in-Time Delivery, CFMS’s just-in-time manufacturing and delivery capabilities.

CFMS believes its iFit technology platform enables a scalable business model that greatly lowers its inventory requirements, reduces the amount of working capital required to support its operations and allows CFMS to launch new products and product improvements more rapidly, as compared to manufacturers of traditional implants.

Manufacturers of traditional knee replacement implants offer products with a limited range of sizes and geometries, which CFMS refers to as off-the-shelf implants.

Off-the-shelf implants are not designed to restore a particular patient's unique anatomy. CFMS’s summary of one study indicates that approximately one in five patients who receives an off-the-shelf total knee replacement is not satisfied with the results.

ConforMIS Intellectual Property

As of May 31, 2015, CFMS owned or exclusively in-licensed 163 issued patents around the world, including 112 patents issued in the United States and 51 foreign patents.

As of May 31, 2015, CFMS owned or exclusively in-licensed 309 patent applications, including 122 patent applications pending in the United States and 187 foreign patent applications.

As of May 31, 2015 CFMS has filed 130 trademark registrations in the United States and in other major markets worldwide, including the following marks: ConforMIS, iFit, iTotal, iDuo, and iUni. CFMS has 43 trademark applications pending in the United States and in other major markets worldwide.

ConforMIS Competition

CFMS competes with several large, well-known companies that dominate the market for orthopedic products, principally LVB Acquisition, Inc., doing business as Biomet Group, Inc., or Biomet, Zimmer Holdings, Inc., or Zimmer, which is expected to acquire Biomet in 2015, DePuy Orthopedics, Inc., or DePuy, a Johnson & Johnson company, Smith & Nephew, Inc., or Smith & Nephew, Stryker Corporation, or Stryker, and MicroPort.

These competitors have significantly greater financial resources, larger sales forces and networks of distributors, a greater number of established relationships, some of which may be exclusive, with key orthopedic surgeons, hospitals and third-party payors, and greater experience in research and development, manufacturing, obtaining regulatory clearances and marketing approved products than CFMS does.

These companies also compete with CFMS in acquiring technologies complementary to, or necessary for, the development of CFMS’s products and recruiting and retaining qualified scientific, engineering and management personnel.

CFMS also competes with numerous other companies that are developing and marketing competitive joint replacement products, as well as companies exploring alternatives to joint replacement such as biologic cartilage repair systems.

ConforMIS 5% Shareholders Pre-IPO

Procific             10.47%

Veron International Limited         9.86%

SGR Sagittarius Holding AG and Aeris Capital Archer L.P.          12.77%

Tasik Temenggor Investments (Cayman Islands) Limited              6.28%

Stanhope Investments               5.24%

Philipp Lang, M.D.        7.27%

Frank Mühlenbeck, Ph.D            12.77%           

ConforMIS Dividends

No dividends are planned.

ConforMIS Use of Proceeds

CFMS expects to receive $121 million from its IPO and use it for the following:

$9 million to purchase and install capital equipment to expand manufacturing capacity;

$59 million to expand and support its sales and marketing efforts;

$26 million to fund research, development and clinical activities; and

the remaining proceeds for working capital and other general corporate purposes.

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

Companies

Symbol Name Price Change % Volume
CFMS ConforMIS Inc. 9.07 -0.21 -2.26 247,924

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