Whirly lollipop on orange background.

The size and price range have already been increased for Glaukos (GKOS), a medical technology company that plans to price their IPO on Wednesday. Their device is so small it defies imagination but is a proven treatment for glaucoma. Screenshot 2015-06-23 16.14.12

Three are several reasons the company is experiencing strong demand for their IPO:

  • Clinical trials are done and they are in the revenue ramp already. This is a product that is in the early stages of commercial adoption in a large ($5-6B) market. Revenue for 2015 should grow 100% and near $100M.
  • Gross margins are high (~80%) and the company is nearing operating profitability on a quarterly basis. Results suggest very high operating margins. The company doesn’t provide a long-term financial model as part of their presentation so it’s harder to pick out a sustainable operating margin level but it’s likely to be high based on current momentum.
  • Even expanded the deal is fairly small and with 31M shares outstanding the float will remain small for some time to come. Given the margins above they may not need to raise more capital (although an organized secondary is likely.)

We’ve started to transcribe the IPO roadshow because this company could become a major factor in eye surgery and we’ve seen a number of companies from Second Sight (EYES) to Presbia (LENS) come public offering solutions in this space.

More work in this space is coming because we see it (sorry!) as a major investment opportunity. Our IV model is below and could change quite a bit once the company is public for a few quarters and we get a better understanding of the long-term model. But still it suggests a $34 share price versus the current top-of-the range $17.

We will update this post when we have the transcript and post-pricing. In the meantime some useful links to material are provided here: Glaukos IPO slides, Presbia IPO slides, Presbia IPO transcript, Second Sight IPO slides.

IV Model

Screenshot 2015-06-23 17.17.04

 

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