IPO Report: Penumbra (PEN)

Francis Gaskins |

Penumbra (PEN) is a global interventional therapies company that designs, develops, manufactures and markets innovative medical devices. The company is based in Alameda, CA.

Two other companies are scheduled for the week of Sept. 14. The full IPO calendar is available at IPO Premium.

SEC Documents

Manager, Joint-managers: J.P. Morgan, BofA Merrill Lynch
Co-managers: Wells Fargo Securities, Canaccord Genuity

End of lockup (180 days): Wednesday, March 16, 2016
End of 10-day quiet period: September 28, 2016

Analyst report estimate:  for paid subscribers only

PEN scheduled a $101 million IPO with a market capitalization of $791 million at a price range midpoint of $26.50 for Friday, Sept. 18, 2015 on NYSE.

Penumbra IPO Summary

Penumbra is a global interventional therapies company that designs, develops, manufactures and markets innovative medical devices.

PEN has a broad portfolio of products that addresses challenging medical conditions and significant clinical needs across two major markets, neuro and peripheral vascular.

Penumbra Valuation

Glossary

Accumulated deficit (mm)

.

.

-$21

     

Per share dilution

.

.

-$20.11

     
             

Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

Penumbra (PEN)

$795

4.9

-2352.1

4.2

4.1

13%

annualizng June 6  mos

       
             

PEN IPO Conclusion

Buy

Rev +41% to $162mm annual rate

67% gross profit

Expects intl'l sales to grow from 34% of rev

New FDA clearance in May, '15

-.2% loss for June 6 mos

4.9x sales

4.2x book

PEN Business

Penumbra is a global interventional therapies company that designs, develops, manufactures and markets innovative medical devices.

PEN has a broad portfolio of products that addresses challenging medical conditions and significant clinical needs across two major markets, neuro and peripheral vascular.

Neuro products
PEN's neuro products are used to treat patients with vascular disease and disorders in the brain, including patients with strokes caused by either vascular occlusion or rupture or weakening of the vessel walls. PEN's neuro products are generally catheter-based technologies that are administered by an interventional neuroradiologist, a neurosurgeon or an interventional neurologist.

PEN received 510(k) clearance from the FDA for the first neurosurgical product, the Apollo System, in 2014. The Apollo system leverages PEN's expertise in thrombectomy and access to offer a minimally invasive approach to surgical removal of fluid and tissue from the ventricles in the brain.

Peripheral products
PEN's peripheral products are used to treat patients with vascular disease in all vasculature other than that which exists in the brain or the heart, including the upper and lower extremities, kidneys, neck and lungs. PEN products that address peripheral vascular disorders are catheter-based technologies that are typically administered by an interventional radiologist or a vascular surgeon.

The Indigo System, launched in 2014, was designed for continuous aspiration mechanical thrombectomy (CAT), leveraging the success of the Penumbra System in ischemic stroke. The Indigo System is designed to remove clots in the peripheral arteries, including in patients with limb ischemia.

On May 26, 2015, PEN received FDA clearance for two larger sizes of the Indigo System, as well as to market the Indigo System for use in the vessels of both the peripheral arterial and venous systems.

Market
PEN estimates that the market for its current neuro and peripheral vascular products in the United States and Europe combined was approximately $1.3 billion in 2014, which PEN estimates represents growth of approximately 3.2% per year from 2012.

While reliable third-party data is not available for markets outside the United States and Europe, PEN  believes that there is a substantial additional market for its neuro and peripheral vascular products in the rest of the world.

According to the American Heart Association (AHA), the worldwide incidence of all forms of stroke was 33 million in 2010. Furthermore, according to a paper published in the journal The Lancet, 202 million people globally were living with peripheral artery disease in 2010.

Products address these conditions
The conditions that PEN’s products address include, among others, ischemic stroke and hemorrhagic stroke, which involve blockage or rupture of blood vessels in the brain, and various peripheral vascular conditions that can be treated through thrombectomy and embolization procedures, which involve the use of medical devices to remove or treat blockages or ruptures of blood vessels.

Company Overview
PEN is an established company focused on the neuro market, and PEN recently expanded its business to include the peripheral vascular market.

PEN sell its products to hospitals, primarily through its salesforce, as well as through distributors in select international markets.

In 2014, 34% of revenue was generated from customers located outside of the United States. PEN  expects this percentage to increase in future years.

Sales outside of the United States are denominated principally in the euro and Japanese yen. As a result, PEN  haa foreign exchange exposure, but does not currently engage in hedging.

In 2014, no single hospital and only one distributor accounted for more than 10% of sales.

PEN focuses on developing, manufacturing and marketing products for use by specialist physicians, including interventional neuroradiologists, neurosurgeons, interventional neurologists, interventional radiologists and vascular surgeons.

PEN designs its products to provide these specialist physicians with a means to drive improved clinical outcomes through faster and safer procedures.

PEN attributes its success to its culture built on cooperation, its highly efficient product innovation process, its disciplined approach to product and commercial development, its deep understanding of its target end markets and its relationships with specialist physicians. PEN believes these factors have enabled PEN to rapidly innovate in a highly capital-efficient manner.

Track record
Since its founding in 2004, PEN has had a strong track record of organic product development and commercial expansion that has established the foundation of its global organization. Some of PEN’s key accomplishments include:

launching its first product, for neurovascular access, in the United States in 2007;

establishing its direct neuro salesforce in the United States and Europe in 2008;

launching the first 510(k)-cleared, aspiration-based product for the treatment of ischemic stroke patients in 2008, and launching four subsequent generations of that product;

launching its first neurovascular coil for the treatment of brain aneurysms in 2011;

launching its first peripheral vascular product in 2013; and

establishing its direct peripheral vascular salesforce in the United States and Europe in 2014.

As of June 30, 2015, PEN had approximately 1,000 employees worldwide.

PEN sell its products to hospitals primarily through its direct sales organization in the United States, most of Europe, Canada and Australia, as well as through distributors in select international markets.

For the year ended December 31, 2014, PEN generated revenue of $125.5 million, which represents a 41.3% increase over 2013, and $3.0 million in operating income as compared to an operating loss of $1.1 million in 2013.

For the six months ended June 30, 2015, PEN generated revenue of $81.3 million, which represents a 41.0% increase over the six months ended June 30, 2014, and $0.2 million in operating income as compared to operating income of $2.4 million for the six months ended June 30, 2014.

Intellectual property

As of June 30, 2015, PEN owned 18 issued patents globally, of which seven were U.S. patents.

As of June 30, 2015, PEN owned 31 pending patent applications, of which 14 were patent applications pending in the United States.

Subject to payment of required maintenance fees, annuities and other charges, eight of PEN’s issued patents are currently expected to expire between 2024 and 2025; five of these patents relate to components of the Penumbra System and the Indigo System and one of these patents relates to methods performed by the Apollo System.

An additional four of PEN’s issued patents, which relate to components of devices that have not been commercialized, are expected to expire between 2026 and 2027.

The remaining six of PEN’s issued patents, which relate to the components of the Penumbra Coil and Ruby Coil, are currently expected to expire after 2027.

PEN’s issued patents relate to the following main areas: mechanical thrombectomy, coil embolization, treatment of aneurysm and treatment of intracranial hemorrhage. P

EN’s pending patent applications relate primarily to the following five main areas: mechanical thrombectomy, coil embolization, coronary atherectomy, blood filtration and treatment of patients with intracranial hemorrhage.

Some of PEN’s pending patent applications pertain to components and methods of use associated with currently commercialized products.

Competition

PEN competes with a number of manufacturers and distributors of neurovascular and peripheral vascular medical devices.

PEN’s most notable competitors are Boston Scientific, Johnson & Johnson, Medtronic, Stryker and Terumo.

All of these competitors are large, well-capitalized companies with significantly more market share and resources than PEN has.

As a consequence, they are able to spend more on product development, marketing, sales and other product initiatives than PEN can. PEN also competes with a number of smaller medical device companies that have single products or a limited range of products.

5% shareholders pre-IPO
Entities affiliated with FMR LLC              11.6%

Adam Elsesser              6.4%

Arani Bose, M.D.           5.9%

Walter Wang       5.7%

Dividends

No dividends are planned.

Use of proceeds

PEN expects to receive $90 million from its IPO and use it for the following:

for product development, including research and development and clinical trials, expansion of PEN’s salesforce and for working capital and general corporate purposes.

From time to time, PEN may consider the acquisition of complementary technologies or businesses, though PEN has no agreements or understandings with respect to any such acquisitions at this time. PEN has no specific plans for the use of the net proceeds that PEN receives from this offering.

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
PEN Penumbra Inc. 59.00 -0.05 -0.08 265,221

Comments

Emerging Growth

IBC Advanced Alloys Corp.

IBC Advanced Alloys Corp is engaged in the production and development of specialty alloy products. Its products include copper alloys and berryllium aluminium alloys.

Private Markets

Knightscope

Autonomous security robots providing advanced detection capabilities at $7 per hour - aiming to define the future of security. Help #StopTheViolence.

Lyft

Lyft matches drivers using their own personal vehicles with passengers who request rides through the smartphone app, and the passengers pay automatically through the app. When using Lyft, passengers have…