Ra Medical Systems' $50 Million IPO Expected This Week

Equities Research  |

Peripheral artery disease (PAD) is a narrowing of the arteries in the extremities that reduces blood flow to those limbs. Estimates of prevalence in the US vary widely, from 8.5 million by the CDC, to as high as 19.2 million by The Sage Group. A review of the scientific literature suggests that many people with PAD go undiagnosed and suffer unnecessarily. PAD can lead to severe symptoms including painful cramping, weakness or numbness in the hips and legs, sores on the feet and legs, erectile dysfunction, critical limb ischemia, amputation, stroke and heart attack.

Though PAD has a variety of causes, a primary cause is atherosclerosis, according to the Mayo Clinic, in which fatty deposits or plaques build up on the interior walls of arteries. Aggravating factors for atherosclerosis and PAD include the usual suspects: smoking, diabetes, obesity, high blood pressure, high cholesterol and family history.

Carlsbad, California, based Ra Medical Systems (pending NYSE: RMED) has developed a laser system to treat patients with PAD. The DABRA system (Destruction of Arteriosclerotic Blockages by laser Radiation Ablation) is a minimally-invasive excimer laser and disposable catheter system that employs photochemical ablation, or the removal of body tissue by using photons, to remove blockages by breaking the bonds of the obstructing plaque without damaging layers of arterial tissue. The company's initial public offering of 3,333,333 shares at $14 to $16 is expected this week via Piper Jaffray and Cantor. At the midpoint of the range, it would be a $50 million deal, valuing the company at $173 million post-IPO.

Ra Medical received approval for the DABRA system from the FDA in May 2017. As of June 30, 2018, the company had an installed base of 31 systems in the US, eight of which have signed usage agreements with Ra Medical, with the remainder temporarily placed for use in demonstrations, trials or training. The current retail price of the DABRA laser is $70,000. In the press release announcing the approval last year, Ehtisham Mahmud, MD, study chair and Chief of Cardiovascular Medicine, Director of Sulpizio Cardiovascular Center-Medicine, and Director of Interventional Cardiology at the UC San Diego School of Medicine, said, "DABRA’s pivotal study demonstrated 95% success without any clinically significant adverse events. Furthermore, the DABRA Catheter is unique in its ability to cross Chronic Total Occlusions (CTOs) without having to cross the lesion with a wire, and it also debulks and modifies arterial blockages, making it an invaluable clinical tool.”

Source: Ra Medical Systems

According to Ra Medical's Form S-1, revenue in the last 12 months was $5.4 million. The company is closely held, with management and the board owning 62.4% of the common stock (to be decreased to 44.5% post-IPO). The company has raised $27.5 million through private placements since inception. In addition to the DABRA laser system, Ra Medical also markets a dermatological laser called Pharos, designed for use in the treatment of inflammatory skin conditions and FDA-approved for psoriasis, vitiligo, atopic dermatitis, and leukoderma. The company has been selling Pharos since 2004, though it states in the Form S-1 that it does "not anticipate significant organic revenue growth in the near term from this mature product line."

Dean Irwin founded Ra Medical in 2002 and has served as CEO, Chief Technology Officer and Chairman of the Board since inception and as Co-President since May 2018. Prior to forming Ra Medical, Mr. Irwin was VP of Research, Development and Engineering at PhotoMedex, a manufacturer of excimer lasers.

While this IPO may fly under the radar for investors seeking the next biopharmaceutical wonder, we would point to the significant market size for effective PAD treatments. A company offering an effective, minimally invasive therapy for such a serious condition is certainly one worth watching. We note that management isn't selling a share on the deal and appears to be committed to participating in and contributing to the long term growth of the company.

[Note: This article has been amended to identify the correct stock exchange. Ra Medical Systems is trading on the NYSE and not Nasdaq as originally stated. We apologize for any confusion this may have caused.]

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DISCLOSURE: The author has no positions or any other beneficial interest in the companies mentioned in this article.


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