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Three Healthcare IPOs: EnteroMedics, Reliant Technologies, Virtual Radiologic

by: SA Editor Abbi Adest November 11, 2007 | about: ETRM / RLNT / VRAD    
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There are three healthcare IPOs on tap for this week : EnteroMedics (ETRM), a biotech start-up that is developing a neuroblocking device that treats obesity; Reliant Technologies (RLNT) a medical device company that designs non-surgical therapies for the treatment of skin conditions under the Fraxel brand; and Virtual Radiologic (VRAD) a telemedicine company specializing in remote diagnostic image interpretation, or teleradiology, services in the United States.

All quotations are from the companies' most recent S-1 filings with links provided.

ENTEROMEDICS (ETRM)
Business Overview (from prospectus)

We are a development stage medical device company focused on the design and development of devices that use neuroblocking technology to treat obesity. Our proprietary neuroblocking technology, which we refer to as VBLOC therapy, is designed to intermittently block the vagus nerve using high-frequency, low-energy, electrical impulses. The vagus nerve controls much of the activity of the stomach, intestines and pancreas and plays a role in food processing. Our initial product under development is the Maestro System, which uses VBLOC therapy to limit the expansion of the stomach, reduce the frequency and intensity of stomach contractions and produce a feeling of early and prolonged fullness. Based on our understanding of vagal nerve function and nerve blocking from our preclinical studies and the results of our initial clinical trials, we believe the Maestro System may offer obese patients a minimally-invasive treatment alternative that has the potential to result in significant and sustained weight loss.

Offering: 5.0 million shares at $14.00 - $16.00 per share. Net proceeds of approximately $68.25 million will be used for achieving regulatory approval of our product; for initiating sales and marketing efforts; for research and product development activities; for working capital and other general corporate purposes.

Lead Underwriters: J.P. Morgan, Morgan Stanley

Financial Highlights:

Research and development expenses were $14.4 million for the year ended December 31, 2006, compared to $8.8 million for the year ended December 31, 2005... Selling, general and administrative expenses were $3.8 million for the year ended December 31, 2006, compared to $2.3 million for the year ended December 31, 2005... Interest income was $1.1 million for the year ended December 31, 2006, compared to $110,000 for the year ended December 31, 2005... Interest expense was $710,000 for the year ended December 31, 2006, compared to $181,000 for the year ended December 31, 2005.

Additional Resources:

RELIANT TECHNOLOGIES (RLNT)

Business Overview (from prospectus)

We are a medical device company that designs, develops and markets non-surgical therapies for the treatment of various skin conditions under the Fraxel brand. We believe our Fraxel laser systems have created a new class of skin rejuvenation therapy and provide patients with consistent and effective treatments that can be delivered quickly without significant pain or downtime. Our Fraxel laser systems are used by physicians to treat a broad range of skin conditions that include wrinkles and fine lines, acne and surgical scars, pigmentation, sun damage, uneven tone and texture and melasma, a blotchy skin discoloration. Patients undergo treatments from our Fraxel laser systems in order to reverse the signs of aging, achieve healthier, younger looking skin and improve their overall appearance. Following the launch of our first Fraxel laser system in 2004, our revenues have grown from $4.5 million in 2004 to $57.5 million in 2006, and to $51.5 million for the first nine months of 2007. We have incurred cumulative net losses of approximately $79.7 million from our inception to September 30, 2007, and we expect to continue to incur net losses for the foreseeable future as we expand our sales force, increase spending on marketing and research and development activities, and incur additional costs related to being a public company.

Offering: 4.7 million shares at $14.00 - $16.00 per share. Net proceeds of approximately $62.1 million will be used for sales and marketing initiatives to support the commercialization of existing and any future products; to support research and development activities, clinical trials and obtaining necessary regulatory approvals; for capital expenditures, consisting primarily of manufacturing equipment.

Lead Underwriters: Piper Jaffray, Banc of America

Financial Highlights:

Net revenues increased $23.7 million, or 70%, to $57.5 million for the year ended December 31, 2006, from $33.8 million for the year ended December 31, 2005... Cost of net revenues increased $9.6 million, or 57%, to $26.6 million for the year ended December 31, 2006, from $17.0 million for the year ended December 31, 2005... Gross profit increased $14.0 million, or 83%, to $30.8 million for the year ended December 31, 2006 from $16.8 million for the year ended December 31, 2005... Overall gross margins improved to 54% in 2006 from 50% in 2005.

Additional Resources:

VIRTUAL RADIOLOGIC (VRAD)

Business Overview (from prospectus)

We believe we are one of the leading providers of remote diagnostic image interpretation, or teleradiology, services in the United States. According to Frost & Sullivan, we are the second largest provider of teleradiology services in the United States. We serve our customers—radiology practices, hospitals, clinics and diagnostic imaging centers—by providing diagnostic image interpretations, or reads, 24 hours a day, seven days a week, 365 days a year. Our unique distributed operating model provides our qualified team of American Board of Radiology-certified radiologists with the flexibility to choose the location from which they work, primarily within the United States, and allows us to serve customers located throughout the country. We provide these services through a robust, highly scalable communications network incorporating encrypted broadband internet connections and proprietary workflow management software.

Offering: 4.0 million shares at $16.00 - $18.00 per share. Net proceeds of approximately $61.7 million will be used to repay debt, for the further development and expansion of the company's service offerings, including, among other things, capital and marketing expenditures related to licensing the use of the company's technology infrastructure and providing management and support services to customers, including but not limited to the provision of licensing and credentialing services; the recruitment of additional radiologists and increased sales and marketing initiatives, including, among other things, expansion to new markets; working capital and general corporate purposes

Lead Underwriters: Goldman Sachs, Merrill Lynch

Financial Highlights:

We have developed a strong customer base and have experienced significant revenue growth from $12.9 million in 2004 to $27.0 million in 2005 and $54.1 million in 2006. We have incurred net losses of $1.4 million, $1.5 million and $0.5 million for the same periods, respectively. In addition, our revenues grew from $37.9 million for the nine months ended September 30, 2006 to $63.3 million for the nine months ended September 30, 2007. We have incurred a net loss of $1.8 million and net income of $2.2 million for the same periods, respectively.

Additional Resources:

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