Minerva Surgical Files For $100 Million U.S. IPO

Oct. 14, 2021 3:15 PM ETMinerva Surgical, Inc. (UTRS)

Summary

  • Minerva Surgical has filed to raise $100 million in an IPO, although the final figure may change.
  • The company sells uterine medical device treatments in the United States.
  • UTRA has grown revenue and gross profit, but faces uncertainties stemming from its ongoing legal battles with Hologic over patent infringement issues.
  • Looking for more investing ideas like this one? Get them exclusively at IPO Edge. Learn More »

Uterine Diseases | Endometriosis

Tharakorn/iStock via Getty Images

A Quick Take On Minerva Surgical

Minerva Surgical (NASDAQ:UTRS) has filed to raise $100 million in an IPO of its common stock, according to an S-1 registration statement.

The firm develops medical device solutions for uterine health conditions.

UTRS has an uncertain future of legal proceedings it is both defending and prosecuting against direct competitor Hologic.

I’ll provide a final opinion when we learn more about the IPO from management.

Company & Technology

Santa Clara, California-based Minerva was founded to develop and commercialize uterine ablation system solutions to address the causes of abnormal uterine bleeding and other conditions of the uterus.

Management is headed by president and CEO David M. Clapper, who has been with the firm since 2008 and was previously VP Product Management at Johnson & Johnson.

Below is a brief overview video of Minerva's ES treatment system:

(Source)

The company’s primary offerings include:

  • Minerva ES Endometrial Ablation System

  • Genesys HTA Endometrial Ablation System

  • Symphion Tissue Removal System

  • Resectr Tissue Resection Device

Minerva has received at least $130 million in equity investment from investors including Boston Scientific, New Enterprise Associates, Novo Holdings, Versant Ventures and Vivo Ventures.

Physician Acquisition

The company markets its systems through a direct sales force in the U.S. and aims to sell to practicing OB/GYN physicians, of which there are approximately 19,000.

The American College of Obstetrics and Gynecology estimates that one-third of women will seek treatment for abnormal uterine bleeding at least once in their life.

Sales and Marketing expenses as a percentage of total revenue have dropped as revenues have increased, as the figures below indicate:

Sales and Marketing

Expenses vs. Revenue

Period

Percentage

Six Mos. Ended June 30, 2021

57.7%

2020

60.8%

2019

85.1%

(Source)

The Sales and Marketing efficiency rate, defined as how many dollars of additional new revenue are generated by each dollar of Sales and Marketing spend, rose to 0.9x in the most recent reporting period, as shown in the table below:

Sales and Marketing

Efficiency Rate

Period

Multiple

Six Mos. Ended June 30, 2021

0.9

2020

0.5

(Source)

Minerva’s Market & Competition

According to a 2021 market research report by Grand View Research, the global market for endometrial ablation was an estimated $3.2 billion in 2020 and is forecast to reach $4.8 billion by 2028.

This represents a forecast CAGR of 5.2% from 2021 to 2028.

The main drivers for this expected growth are an increasing incidence of gynecological disorders, growing public awareness of treatment options and less invasive technology development.

Also, in 2020, the United States accounted for the largest market, with 33.6% of revenue generated.

The Asia Pacific market is expected to produce strong growth through 2028.

Major competitive or other industry participants include:

  • Hologic

  • Medtronic

  • CooperSurgical

Minerva Surgical’s Financial Performance

The company’s recent financial results can be summarized as follows:

  • Growing topline revenue, at an accelerating rate of growth

  • Increasing gross profit and gross margin

  • Variable operating losses, negative operating margin trending lower

  • Stable cash used in operations

Below are relevant financial results derived from the firm’s registration statement:

Total Revenue

Period

Total Revenue

% Variance vs. Prior

Six Mos. Ended June 30, 2021

$ 25,952,000

117.4%

2020

$ 37,768,000

45.2%

2019

$ 26,012,000

Gross Profit (Loss)

Period

Gross Profit (Loss)

% Variance vs. Prior

Six Mos. Ended June 30, 2021

$ 15,565,000

255.4%

2020

$ 19,120,000

62.0%

2019

$ 11,805,000

Gross Margin

Period

Gross Margin

Six Mos. Ended June 30, 2021

59.98%

2020

50.62%

2019

45.38%

Operating Profit (Loss)

Period

Operating Profit (Loss)

Operating Margin

Six Mos. Ended June 30, 2021

$ (16,351,000)

-63.0%

2020

$ (15,390,000)

-40.7%

2019

$ (19,637,000)

-75.5%

Net Income (Loss)

Period

Net Income (Loss)

Six Mos. Ended June 30, 2021

$ (29,047,000)

2020

$ (18,263,000)

2019

$ (52,046,000)

Cash Flow From Operations

Period

Cash Flow From Operations

Six Mos. Ended June 30, 2021

$ (6,187,000)

2020

$ (12,241,000)

2019

$ (19,792,000)

(Glossary Of Terms)

(Source)

As of June 30, 2021, Minerva had $11.6 million in cash and $207.3 million in total liabilities.

Free cash flow during the twelve months ended June 30, 2021, was negative ($8.9 million).

IPO Details

Minerva intends to raise $100 million in gross proceeds from an IPO of its common stock, although the final figure may differ.

No existing shareholders have yet indicated an interest to purchase shares at the IPO price.

Management says it will use the net proceeds from the IPO as follows:

We currently intend to use the net proceeds from this offering, together with our existing cash, to meet the $15 million deferred payment obligation and to pay up to $30 million in potential milestone payments to BSC, to expand our sales force and operations, support research and development, and for general corporate purposes, including litigation expenses and interest payments on our outstanding debt.

(Source)

Management’s presentation of the company roadshow is not available.

Regarding outstanding legal proceedings, the firm is involved in three patent infringement legal actions with Hologic, with two of the three actions brought by Hologic against Minerva and the one an action by Minerva against Hologic. Management did provide a characterization of the loss or gain potential as a result of these legal actions.

Listed bookrunners of the IPO are J.P. Morgan, Piper Sandler, UBS Investment Bank and SVB Leerink.

Commentary

Minerva is seeking public investment to fund its operational expansion and to pay for the legal actions it is involved with Hologic, a direct competitor.

The firm’s financials show strong and accelerating topline revenue growth and gross profit growth, variable operating and net losses and stable cash used in operations.

Free cash flow for the twelve months ended June 30, 2021, was negative ($8.9 million).

Sales and Marketing expenses as a percentage of total revenue have dropped as revenue has increased; its Sales and Marketing efficiency rate has risen materially to 0.9x in the most recent six-month reporting period.

The market opportunity for uterine ablation treatments is large and expected to grow at a moderate rate of just over 5% through 2028.

J.P. Morgan is the lead underwriter and IPOs led by the firm over the last 12-month period have generated an average return of 1.6% since their IPO. This is a mid-tier performance for all major underwriters during the period.

The primary risk to the company’s outlook is the uncertain future of the legal proceedings it is defending and prosecuting against Hologic.

I’ll provide a final opinion when we learn more about the IPO from management.

Expected IPO Pricing Date: To be announced.

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This article was written by

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