EndoChoice files for up to $115M IPO to back its wider-view Fuse endoscopy system

EndoChoice chairman Scott Huennekens

Gastrointestinal endoscopy player EndoChoice has filed with the SEC for a big IPO that's long been rumored to raise up to $115 million. Med tech players have been facing a mixed bag on Wall Street this year, as an uncommon number are making it onto the market but most have faced weak short-term returns. In addition, several med techs have been forced to withdraw proposed offerings as investor demand remains selective.

In its favor, EndoChoice has lined up a group of bankers for the IPO that are headed by not one, but two, major, bulge-bracket banks: J.P. Morgan and BofA Merrill Lynch. That, along with the ambitious sum, indicates substantial confidence that this med tech IPO will get done.

The GI endoscopy company recently brought in a high-profile chairman, Scott Huennekens, who led catheter-based imaging company Volcano through its 2006 IPO and grew the company to about $400 million in annual sales and, eventually, a $1.2 billion acquisition by Royal Philips ($PHG) that closed recently.

EndoChoice also secured $57 million in one of the largest mezzanine venture rounds for a med tech in the first quarter. New investors included Deerfield, Ally Bridge Group and Rock Springs Capital; Deerfield and Rock Springs are both prominent crossover investors who typically invest in private companies that are close to going public.

Oddly, the EndoChoice IPO filing makes no mention of that financing or those new investors, but that could be due simply to a complex holding company structure. The filing lists Sequoia Capital, River Cities Capital and Council Capital among the primary shareholders.

At March 31, EndoChoice had $33 million in cash and an accumulated deficit of $112.4 million since it was founded in 2008.

The Fuse endoscopy platform--Courtesy of EndoChoice

While it has substantial revenues, the company isn't particularly close to breakeven yet. In 2014, the Alpharetta, GA-based company had $61.4 million in net revenues with a net loss of $53.6 million.

Its losses have widened rapidly as the company has scaled up its marketing efforts in the last few years. EndoChoice has more than 2,500 U.S. customers, with a 103-person, direct sales force in the U.S. and Germany and distributor sales in 25 countries. It markets its products to about one-third of U.S. GI departments.

The IPO is focused on gaining enough cash to effectively market its Fuse full spectrum endoscopy system. The company started limited commercialization of Fuse in December 2013, just after it gained it in a $40 million, all-stock deal to acquire Peer Medical.

The Fuse system has shown in clinical testing that it detects 69% more pre-cancerous polyps than standard, forward viewing colonoscopes. It enables GI tract visualization for upper and lower endoscopy procedures.

The colonoscope in the system has three cameras and a 330-degree view--that's an advance over the field of view of about 140 to 170 degrees for standard colonoscopies. The Fuse gastroscope has two cameras and offers a 245-degree range of vision--improving upon the 150 degrees that are standard for this instrument.

Editor's note: An earlier version of this story contained an incorrect title for Scott Huennekens.

- here is the release and the SEC filing

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