At-home compression wearable player Tactile Systems files for up to $86M IPO

Tactile Systems compression wrap--Courtesy of Tactile Systems

This year's med tech IPOs have gotten off to a rather underwhelming start. But given the rocky broader stock market and the dearth of recent IPOs in the sector, that's not too surprising. The inaugural med tech IPO filing of 2016 is for at-home compression wrap company Tactile Systems Technology to raise up to $86 million.

While its leg compression tech may not be groundbreaking, the company does offer substantial revenues with $47.7 million in 2014 revenues and a narrow net income of $2.1 million. For the first 9 months of 2015, it had $41.7 million in revenues with an even slimmer $0.1 million in net income.

Almost all of those sales, $43.7 million or 92%, came from its Flexitouch System that's designed to mimic manual lymphatic drainage therapy. It can be applied daily in one-hour treatments at home to lymphedema. The system isn't exactly new, though; it was first FDA cleared in 2002 with the current version cleared in 2006. Tactile Systems also markets the ACTitouch System to treat chronic venous insufficiency. That was approved in June 2013 and had $2.4 million in 2014 revenues.

Tactile Systems has only raised $29.5 million in equity from shareholders including Galen Partners and Radius Ventures. But if its IPO gets done, the bulk could go to pay out those existing shareholders.

The IPO filing with the SEC lists the use of proceeds as about $5 million for sales and marketing; about $5 million for product development and about $3 million for reimbursement and clinical activity. The only remaining line-item is an undisclosed amount for a dividend payout to the company's Series A preferred stockholders.

That could indicate that this IPO is more about cashing out early shareholders than offering the company the cash to continue to grow revenues and earnings.

The long-term goal for Tactile System is to establish itself as a significant player in the at-home treatment of chronic diseases. To do so, it expects to establish its lymphedema and chronic venous insufficiency products as the standards of care in the U.S. and to establish and expand its marketing outside the country, as well as to develop new products in clinically adjacent areas.

- here's the IPO prospectus

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