Medical Device IPO: MAKO Surgical Competes With Zimmer, Stryker

MAKO Surgical (MAKO) provides an advanced robotic-arm solution and implants for orthopedic knee surgery. The company plans to go public this week.

All quotations are from the company's most recent S-1 filing with links provided.

Business Overview (from prospectus)

We are a medical device company that markets our advanced robotic-arm solution and implants for minimally invasive orthopedic knee procedures. We offer MAKOplasty, an innovative, restorative surgical solution that enables orthopedic surgeons to consistently, reproducibly and precisely treat patient-specific, early to mid-stage osteoarthritic knee disease. MAKOplasty is performed using our proprietary, U.S. Food and Drug Administration, or FDA, cleared Tactile Guidance System. Our Tactile Guidance System includes an interactive tactile robotic-arm platform that utilizes tactile-guided robotic-arm technology and patient-specific visualization to prepare the knee joint for the insertion and alignment of our resurfacing implants through a keyhole incision in a minimally invasive, bone-preserving and tissue-sparing procedure. We believe MAKOplasty will empower physicians to address the needs of the large and growing, yet underserved population of patients with early to mid-stage osteoarthritic knee disease who desire a restoration of quality of life and reduction of pain, but for whom current surgical treatments are not appropriate or desirable due to the highly invasive nature of such procedures, the slow recovery and the substantial costs of rehabilitation, medication and hospitalization.

Offering: 5.1 million shares at $14.00 - $16.00 per share. Net proceeds of approximately $68.4 million will be used for the expansion of sales and marketing activities; for R&D activities; repayment of debt; for working capital and for general corporate purposes.

Lead Underwriters: J.P. Morgan, Morgan Stanley

Financial Highlights:

Revenue was $35,000 for the nine months ended September 30, 2006, compared to $355,000 for the nine months ended September 30, 2007... Cost of revenue was $29,000 for the nine months ended September 30, 2006, compared to $291,000 for the nine months ended September 30, 2007... Selling, general and administrative expense was $3.2 million for the nine months ended September 30, 2006, compared to $7.7 million for the nine months ended September 30, 2007... Research and development expense was $3.3 million for the nine months ended September 30, 2006, compared to $5.3 million for the nine months ended September 30, 2007.

Competition:

Our success depends on convincing hospitals, surgeons and patients to utilize the robotic-arm technology embodied in both our current version of the TGS to perform unicompartmental resurfacing and our planned version 2.0 of the TGS to perform multicompartmental resurfacing of the knee. We face competition from large, well-known companies, principally Zimmer Holdings, Inc. (ZMH), DePuy Orthopedics, Inc., a Johnson & Johnson (JNJ) company, Stryker Corporation (SYK), and Biomet, Inc., that dominate the market for orthopedic products. Each of these companies, as well as other companies like Smith & Nephew, Inc. (SNN), which introduced the Journey Deuce Bi-Compartmental Knee System in July 2007, offers conventional instruments and implants for use in conventional total and partial knee replacement surgeries as well as unicompartmental resurfacings procedures, which may compete with our MAKOplasty solution and negatively impact sales of our TGS. A number of these and other companies also offer surgical navigation systems for use in arthroplasty procedures that provide a minimally invasive means of viewing the anatomical site.

Currently, we are not aware of any well-known orthopedic companies that broadly offers robotics technology in combination with surgical navigation. All of these companies, however, have the ability to acquire and develop robotics technology that may compete with our TGS. In addition, Biomet has a license from Z-KAT to intellectual property rights in computer-assisted surgical navigation, or CAS intellectual property, for use in the field of orthopedics. The license is non-exclusive with respect to use of CAS intellectual property in combination with robotics technology and exclusive with respect to all other uses within the field of orthopedics, which could enable them to compete with us.

Additional Resources:

• Company website
• Online road show
• AP: 'Mako Surgical to raise $68.4M in IPO'
• John Ogg: 'IPO Filing: MAKO Surgical Corp.'