Ellipse Tech files for up to $75M IPO to back magnetically adjustable orthopedic implants

Precice Intramedullary Limb Lengthening System--Courtesy of Ellipse Tech

Startup Ellipse Technologies has been relatively cash efficient--it had spent less than $38 million to fund it for roughly the last decade since its inception. It now has substantial revenues from its magnetically adjustable orthopedic implants--over $20 million during the first half of this year. But Ellipse remains loath to project when it might become consistently profitable; it did report a slim operating profit during the first half of 2015 of about $1.1 million.

Despite a rocky broader stock market, the two most recent medical device IPOs, for Penumbra ($PEN) and Novocure ($NVCR), are up about 36% and 18%, respectively. Those double-digit returns bode well for seeing enough continued investor interest to support additional medical device IPOs.

As for Ellipse Tech, the Aliso Viejo, CA-based sells magnetically adjustable orthopedic implant systems based on its Magnetic External Control (MAGEC) platform. The idea is to offer implants that are adjustable not only at the time of implantation, but also over the course of treatment as patients heal, grow and age. It could offer an attractive option to eliminate repeat surgical procedures that can be necessary to adjust or replace comparable implants.

It markets the MAGEC-EOS spinal bracing and distraction system to treat early onset scoliosis and the Precice limb lengthening system to treat limb length discrepancy. It's had over 4,000 patients treated globally with the MAGEC technology. MAGEC-EOS was CE marked in 2009 and FDA cleared in 2014; Precice was CE marked in 2010 and FDA cleared in 2011. The company also has a pipeline of MAGEC orthopedic implants that target trauma, knee osteoarthritis and degenerative spine disease.

The technology uses rotational magnetic force from an external remote controller to alter the size, shape, position and alignment of implants via a mechanical, torque-increasing gearing system. It uses cylindrical permanent magnets—two in the controller and one in each implant. Adjustments can be performed either by a doctor or, at times, even by the patient themselves based upon a physician prescription.

Ellipse Tech had 78 U.S. independent sales agencies and an additional 30 international independent distributors at June 30. Most of the IPO financing is expected to go to expand its sales capabilities, with much of the remainder going to R&D.

The startup is heavily backed by Swiss healthcare investor HBM Partners, which holds 29.9% of the company pre-IPO via one fund and an additional 12.9% via another. Wexford Capital is also a major investor, holding 18% of the startup.

- here is the SEC filing