As the medtech market evolves, companies looking to go public face unique challenges and opportunities. At a panel at LSI USA ‘24, industry experts shared their thoughts on preparing for an IPO, alternative financing strategies, and the importance of timing and stakeholder relationships. Here are six key points discussed by the panelists.

Current IPO Market Conditions

The IPO market has seen a dramatic downturn in recent years, but there are signs of recovery. Shayne Kennedy, a corporate partner at Latham & Watkins, highlighted the recent struggles and the slow resurgence.

"We're coming out of a terrible IPO market. I think IPOs, as a whole, dropped like 93% in 2022. In 2023, we started to see a little bit of a rebirth, mostly toward the end of the year. When the IPO market comes back, it’s oftentimes led by the biotech companies," said Kennedy. Eric Dimise from the New York Stock Exchange echoed this optimism, noting, "I agree biotech is a leading indicator. We’ve already seen six biotech IPOs between January and February this year, compared to last year’s 12."

Alternative Financing Strategies

With the IPO market's volatility, companies have sought alternative financing routes to sustain their operations and growth. Jaione Maiz from Anzu Partners emphasized the importance of exploring non-traditional funding sources.

"Over the past 12 to 18 months, we've been pushing hard to look for alternative funding sources—perhaps there’s government funding or organizations interested in supporting projects or companies. Specifically, we looked at partnerships with strategics. If you can get non-dilutive financing, that’s also validation for the company to help move that next milestone," Maiz explained. 

Preparing for an IPO

Strategic timing and early preparation are crucial for a successful IPO. Kennedy stressed the need for early engagement with key stakeholders and thorough preparation.

"You have to remember that as a public company, getting somebody off your board is nearly impossible unless they're willing to leave," Kennedy advised. Dimise added, "Start early and prep, prep, prep. You don’t want your first earnings call to be the first time you’ve ever gone through that process. We often advise companies to do a couple of quarterly earnings calls as a private company before you IPO, so you're prepared to do that."

The Importance of a Strong Board

Building the right board is essential for navigating the complexities of going public. Kennedy underscored the significance of having experienced and culturally aligned board members.

"Building the right board for your public company is absolutely critical. It’s important to take the time to ensure you have folks on your board that provide the right experience and background and are a cultural fit," Kennedy noted. This preparation ensures that the board can effectively guide the company through the IPO process and beyond.

Analyst and Banker Relationships

Early and strategic relationships with analysts and bankers are vital in a successful IPO. Dimise highlighted the long-term importance of these relationships.

"You date your banker, but you marry your analysts. These are the folks who will be publishing research and providing buy/sell/hold advice to the buy side," he explained. Maiz also recommended, "When thinking about bankers, ask them for comps. This is a helpful way to gauge whether they understand what you’re doing."

Market and Economic Factors

Various macroeconomic factors, including interest rates and election cycles, significantly influence the IPO market. Dimise pointed out the positive impact of anticipated interest rate cuts.

"The expectation that there will be cuts in interest rates is a huge plus over last year," he said. Kennedy added that the re-engagement of strategics can boost the market, stating, "One of the things you'll see help the market, which I think we're starting to see, is just strategics re-engaging."

Conclusion

The full recording of the panel can be found in LSI’s resource hub at the link below:

• What Does 2024 Hold for the Frozen IPO Market?

Navigating the IPO process in the medtech market requires careful planning, strategic relationships, and an understanding of broader economic factors at play. By preparing for an IPO early, building a robust board, and exploring alternative financing options, medtech companies can position themselves for successful public offerings. These insights provide a valuable roadmap for companies aiming to attract medical device investors and achieve long-term growth in the medtech industry.