CardioDX IPO Might Test Well For Aggressive Investors

| About: CardioDx, Inc. (CDX)

CardioDx Inc (CDX), a molecular diagnostics firm focused on the development and commercialization of novel, proprietary tests, plans to raise $75 million in its upcoming IPO. The Palo Alto, California-based firm will offer 5.0 million shares at an expected price range of $14-$16 per share. If the IPO can reach the midpoint of that range at $15 per share, CDX will command a market value of $282 million.

CDX filed on October 11, 2013.
Lead Underwriters: Jefferies LLC, BofA Merrill Lynch
Underwriters: Piper Jaffray & Co, William Blair and Co LLC

As a molecular diagnostics company, CDX uses genomic technologies to provide healthcare professionals with diagnostic information. The firm's diagnostic techniques aim to be significantly less expensive and less invasive than common diagnostics, saving time and money for patients and doctors and potentially allowing for major savings on the part of healthcare payers.

CDX is currently focused on diagnostics for cardiovascular diseases, specifically coronary artery disease (NYSEARCA:CAD), arrhythmia and heart failure. The firm's Corus CAD test is the first commercial blood-based gene expression test that provides a current-state assessment for patients with signs of obstructive CAD. Since Corus CAD became commercially available in 2009, the firm has delivered results for more than 47,000 tests.

Critically, the test gained Medicare Part B coverage in 2012, making it a covered benefit for approximately 48 million Medicare beneficiaries.

CDX offers the following figures in its S-1 balance sheet for the nine months ending September 30, 2013:

Revenue: $5,141,000
Net Loss: ($27,872,000)
Total Assets: $46,808,000
Total Liabilities: $8,678,000
Stockholders' Equity: ($117,926,000)

Until receiving Medicare Part B coverage for Corus CAD in August 2012, CDX did not develop a major commercial presence. After Corus CAD obtained coverage the firm began to expand its sales force and enhance its marketing efforts. In the nine months ended September 30, 2013, CDX delivered results for 14,104 tests and generated $5.1 million in revenue. As of September 30, 2013, the firm's total stockholders' deficit was $117.9 million, and it had $37.6 million in cash, cash equivalents and investments.

CDX must compete with other firms attempting to develop similar tests, but its chief competition actually comes from the firms that offer the currently-used diagnostic technology, many of which have excellent capitalization and access to far superior resources, including marketing abilities. These firms include diagnostic imaging companies like GE Healthcare (NYSE:GE), Siemens AG (SI), and Koninklijke Philips NV (NYSE:PHG), as well as commercial laboratories such as Laboratory Corporation of America Holdings (NYSE:LH) and Quest Diagnostics Incorporated (NYSE:DGX).

Founder, President and CEO David L. Levison has been with CDX since its inception in 2004. He previously served as a Venture Partner at Texas Pacific Group Ventures and as interim Chief Executive Officer of XDx, Inc., a molecular diagnostics company focused on the immune system. He also was the Founder, President and CEO of iScribe, Inc., a healthcare technology company, and President of Oncology Therapeutics Network Corporation.

Mr. Levison received his M.B.A. from Stanford University and his B.S. in Economics from our great local Williams College here in Williamstown, MA.

Given Corus CAD's recently-minted Medicare coverage and the significant use for such a test to cut costs for payers, this firm may be worth a roll of the dice, although we don't foresee the IPO becoming a superstar. We rate this IPO neutral to positive for very aggressive investors.

There isn't yet enough data to indicate whether the test will catch on with the medical industry, which is notoriously resistant to the introduction of new technologies and slow to adopt them.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.