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Perceptive Advisors-backed Company Prepares to Go Public

Vapotherm, an early stage company, warned in its IPO prospectus that it may need to raise additional capital to remain viable.

Another company that Perceptive Advisors invested in when it was private is planning to go public.

Vapotherm, a medical technology company that develops products used to treat patients suffering from respiratory distress, has filed a preliminary prospectus for an initial public offering. So far it has not indicated how many shares it plans to offer, the price it is hoping to fetch, or when exactly it plans to price the shares.

An IPO may be challenging for the company given its shaky finances and tumbling stock market. Perceptive, a health care focused hedge fund firm led by Joseph Edelman, did not respond to a request seeking comment.

Perceptive owns almost 11.9 million shares of Vapotherm, or 6.7 percent of the total, according to the prospectus. This includes a little more than 11 million shares held by Perceptive Life Sciences Master Fund and 844,329 shares that can be acquired from the exercise of warrants held by Perceptive Credit Holdings.

Vapotherm is not exactly a blue-chip company.

In the prospectus, the Exeter, New Hampshire-based company says it is in the early stages of growth and is developing the market for certain of its products. As a result, it has experienced negative cash flows from operations since inception and had a deficit of $201.5 million at the end of September.

Vapotherm has mostly financed its operations through the issuance of preferred stock and debt financing.

“The future viability of the company is dependent on its ability to generate cash from operating activities or raise additional capital to finance its operations,” the company warned in the IPO prospectus, filed October 19. “These conditions raised substantial doubt about the company’s ability to continue as a going concern through October of 2019.” 

In April, Vapotherm hammered out a credit agreement with Perceptive Credit Holdings II, which provided a total $42.5 million in three tranches. The first tranche of $20 million was drawn on the April 6 closing of the agreement. The company drew down the second tranche of $10 million in July, and a third tranche of $12.5 million may be drawn in the first quarter of 2019, according to the filing.

Vapotherm has issued warrants to Perceptive to buy 844,329 shares of series D convertible preferred stock at an exercise price of $1.137 per share.

Last year, Perceptive bought a little more than seven million shares of Series D convertible preferred stock at a purchase price of $1.137 per share. Perceptive earlier received two million shares of Series C convertible preferred stock at a purchase price of $1 per share, the prospectus shows. And in September, the hedge fund bought almost two million shares of Series D-1 convertible preferred stock for $1.137 each.

In early October, another Perceptive-backed company, Kodiak Sciences, priced its IPO at $10 a share, below its anticipated range of $13 to $15. Shares of the developmental-stage biopharmaceutical company closed Tuesday at $9.88.

Perceptive, which had invested in the company when it was private, now owns 8.7 percent of Kodiak’s shares.

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