Since Coronavirus, there has been a lull in orthopedic IPOs’, but the lull may be over next year.
First let’s look back at the last 5 IPOs for reference and understand their terrible stock performance over the last 4 years.
- May 2023 – Monogram Orthopaedics (80% drop in stock price, $13.50 to $2.66 to date)
- October 2021 – Bone Biologics (99+% drop in stock price, $1099.20 to $1.12 to date)
- April 2021 – Treace Medical Concepts (80% drop in stock price, $25.53 to $7.50 to date)
- February 2021 – Bioventus (36% drop in stock price, $17.22 to $11.03 to date)
- October 2020 – Paragon 28 (44% drop in stock price, $18.71 to $10.42 to date)
These numbers don’t exactly make you want to pop the champagne, do they?
But the IPO market door may be opening up again in 2025 for a new crop of public orthos.
4 favorable dynamics influencing the IPO market for orthos:
1/ Strong Growth and Options. Strong companies like OSSIO doubling sales Y/Y with a non-permanent fixation monopoly are poised to be acquired, but may tap the public markets if an acquirer doesn’t write a big enough check. Read – Where’s the implant? OSSIO ushers in natural bone fixation. First screw case and fresh funding.
2/ Dogs and IPO Necessity. Stumbling companies like Exactech (read – The Rise and Fall of Exactech: From Orthopedic Pioneer to Chapter 11 Bankruptcy) may be forced to go public again for capital. For many unprofitable small companies the IPO market is their only chance to tap into the capital markets (even at poor valuations).
3/ FDA’s Business-Friendly Shift. The regulatory atmosphere has shifted with the new political pro-business trend. The FDA under Trump seems a bit more open for business, which means less red tape and more runway for getting new devices to market. This could entice more orthopedic companies to test the IPO waters. Read – The FDA 2.0
4/ M&A Signals IPO Potential. High M&A activity in the ortho sector can signal to investors that there’s value in these companies, potentially boosting IPO prospects as companies look to fund growth or acquisitions. M&A was the primary exit vehicle in 2024, a hot year for acquisitions. Read – A review of Ortho M&A in 2024.
6 unfavorable dynamics influencing the IPO market for orthos:
1/ Economic and Market Volatility. General market conditions, influenced by economic policies, inflation, interest rates, and global events, can make investors wary of new investments, particularly in sectors like medical devices which require substantial R&D investment.
2/ High Costs of Going Public. The process of an IPO is expensive, involving underwriting fees, legal costs, and ongoing compliance costs. For smaller ortho companies, these expenses can be prohibitive, especially if the post-IPO performance is not guaranteed.
3/ Regulatory Risks. Despite potential improvements, the FDA’s approval process can still be lengthy and unpredictable, posing risks to companies banking on new products for post-IPO success. Changes in regulations can impact the marketability and profitability of devices.
4/ Competition from Established Players. Large, established companies often acquire or overshadow startups. This competition can make it challenging for new entrants to gain significant market share or investor confidence post-IPO.
5/ Investor Fatigue or Shift in Focus. After periods of heavy investment in health tech, investors might shift their focus to other sectors perceived as having higher growth potential or less saturated markets. This can lead to a cooling of interest in ortho IPOs.
6/ Historical Performance of IPOs. See above. Recent IPOs in the ortho sector have not always yielded favorable stock performance, which might deter investors from similar ventures without clear differentiation or proven market success.
So, Who’s Ready for the Spotlight?
For companies like OSSIO, who’ve got their act together, this could be the moment to shine. If you’ve got the tech, the data, and the market fit, why not go public? An IPO could not only provide the capital needed to scale up but also validate your position as a market disruptor.
On the flip side, let’s talk about the “dogs” needing capital at any cost. If your company’s more about chasing its own tail than innovating, think twice. The market’s brutal, and with those past performances in mind, you need more than just a good story; you need results.
The Bottom LineThe IPO market for orthopedic companies might be cracking open, but it’s not a free-for-all. If you’re in the game with genuine innovation and a solid business model, there’s opportunity. But if your company’s just another dog in the race, you might end up limping back to the kennel.