IPOs: Sientra goes for $75M, while Nevro nerves up for $100M

Two ambitious med tech IPOs are slated to go out in the coming week or so. Both are on their IPO road shows now. Each has an impressive array of investors, high targeted IPO amounts and substantial potential company valuations.

Breast implant maker Sientra hopes to raise $75 million in an IPO expected around Tuesday, Oct. 28, while spinal cord stimulation company Nevro has set its sights even higher for a $100 million IPO around Wednesday, Nov. 5.

Sientra is making the case for a better breast implant. It's almost breaking even already, having gained FDA approval based on what it said is the largest prospective, long-term safety and effectiveness pivotal study of breast implants ever conducted in the U.S. of 1,788 patients.

The startup had better have its ducks in a row; it's facing enormous, entrenched competitors Mentor, a division of Johnson & Johnson ($JNJ), and Allergan ($AGN). Sientra acknowledges in its prospectus that the two have been the market leaders for many years and that they have "the majority share of the breast implant market in the United States."

Its data do look a bit better, but it seems like an incremental improvement rather than a revolutionary change. In a 5-year study, Sientra reported slightly lower rates of several complications than Allergan and Mentor. However, those companies reported 6-year, rather than 5-year, data. For Sientra, the rate of rupture was 2.1%, capsular contracture was 9.8% and reoperation was 24%.

But since women who opt for breast implants are likely aware that reoperation is commonplace but opt for them anyway, a slightly lower chance of major complications may be a significant lure for them. In addition, the startup claims that its True Texture exterior texturing enables a softer and more lifelike feel in the body.

Since it was founded in 2005, Sientra has raised $151 million in equity from investors including OrbiMed (33.8% pre-IPO stake), Clarus Ventures (29.8%), Abingworth (18.6%), Goldman Sachs (8.6%) and the Teachers Insurance and Annuity Association of America (6.9%).

The startup had $21.9 million in net sales during the first half of 2014, with an operational loss of $2.6 million. That's up from $17.9 million in net sales in the first half of 2013, with an operational loss of $9.2 million.

It has proposed selling 5 million shares at a price range of $14 to $16. At the midpoint, Sientra would be valued at $230 million.

The Nevro IPO is likely to be even more high-profile, given its aspirational $100 million target. It expects to sell 6.3 million shares at a price range of $15 to $17. At the midpoint, that would value Nevro at $401 million.

The startup has developed a spinal cord stimulation (SCS) system to treat chronic pain in the back and legs. But the company doesn't have FDA approval yet. Nevro submitted a PMA for its Senza SCS System in June; it hopes to receive an approval and launch in the U.S. by early 2016.

The next major hurdle will be U.S. reimbursement, which will likely be difficult given the range of inexpensive generic drugs available to treat chronic pain. Senza has been available commercially in some European markets since November 2010.

Nevro had $14.2 million in revenues during H1 2014, with a loss from operations of $14.7 million. That's up from $11.1 million in revenue in H1 2013, with an operating loss of $13.3 million.

Founded in 2007, Nevro has an impressive list of investors including Johnson & Johnson (18.1% pre-IPO stake), Bay City Capital (13.2%), Three Arch Partners (13.2%), Novo A/S (11.8%), Accuitive Medical Ventures (10%), Aberdare Ventures (9.6%) and New Enterprise Associates (7.5%).

Existing investors have committed to buying up to $25 million of the IPO offering, which is a hearty good-faith endorsement that should give it substantial traction toward getting the deal done.

In March, Nevro completed its pivotal SENZA-RCT study, which it said is the first prospective, randomized, controlled pivotal study conducted for a SCS device. The study was a noninferiority trial versus commercially available SCS devices. It also conducted a post hoc superiority analysis of the data.

The data showed that Senza was noninferior to traditional SCS therapy on all primary and secondary endpoints. It was nearly twice as effective in treating back pain; 84.3% of patients reported 50% or better pain relief at three months, while traditional SCS came in at 43.8% of patients. These results demonstrated statistical superiority in the post hoc analysis.

- here are the filings and road shows for Sientra and Nevro

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