Remember the heady days of the late 90’s, when every college prof with a lab and a vision was forming a company, and a few years later, trying to take it public? We admit, we got caught up in those times and are still a bit nostalgic. Which is why we read with interest this Dow Jones newswire report that the recent slew of IPOs in medical device firms may be turning into a bubble. Of course, venture capitalists deny they’re throwing too much money around, but we’ve heard that before…
The blow-ups of the late 1990s ushered in a drought for device IPOs that persisted until the early part of this decade. In the past four years, the cycle has begun anew, with revenue generators such as orthopedics company Kyphon Inc., devicemaker Cutera Inc. and Volcano, which makes products used to diagnose and treat heart disease, clearing the way.
…Just three companies went public in 2002 and none in 2003. Since 2004, however, 23 have gone public: 12 in 2004, seven in 2005 and four this year, according to VentureOne, a venture capital research firm.
The four companies that have gone public in 2006–Volcano; Northstar; Restore Medical Inc., which sells a snoring treatment; and Cardica Inc., a developer of anastomotic systems used by surgeons during bypass surgery–have raised $227.9 million through their IPOs. That’s almost as much as the $275.2 million raised through medical-device IPOs in all of 2005, according to VentureOne.
Will this cycle end with a blow-up similar to the late 1990s? That’s a possibility, but many investors contend it won’t.
One reason: Many companies today target gigantic opportunities that either didn’t exist in the mid-1990s or were smaller.
The article goes on to spell it out: we were all younger and thinner in the 90’s, and now that we’re older and fatter these new device companies have a chance of making money. Pass the leftovers!
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