How Hot is MIGS?
The string of approvals and acquisitions in the microinvasive glaucoma surgery space has been one of ophthalmology’s more promising stories. The news shone a bright stage light on what had been one of ophthalmology’s lower-profile sectors.
But just how hot is MIGS getting?
Followers of the MIGS space have likely been pondering that very question since this summer when the FDA approved the second MIGS device and another venture capital-backed MIGS developer was gobbled up by a larger strategic buyer.
In late July, the FDA approved Alcon’s CyPass Micro-Stent, which Alcon/Novartis acquired in February with its purchase of Transcend Medical for an estimated $235 million. Under the terms of this deal, Alcon was required to pay another $75 million upon FDA approval of CyPass. The deal also includes an additional $75 million payment for a future, undisclosed FDA approval. Revenue based milestones could bring the deal to well over $500 million.
In mid-July, Santen Pharmaceutical of Japan announced the acquisition of Miami-based InnFocus for an up-front payment of $225 million plus performance-based considerations upon achievement of certain development, regulatory, and commercial milestones. One might expect a final tally that could rival – or exceed – the price paid for Transcend.
InnFocus has developed the promising MicroShunt implant, which has shown impressive and sustainable lowering of intraocular pressure (IOP) when used alone or in combination with cataract surgery. It is now enrolling for its 512-patient pivotal trial, with estimated completion by mid-2017. Following an FDA mandated one-year follow-up period, InnFocus could attain final approval in 2019. The MicroShunt has already received the CE mark in Europe.
Let’s examine the values of the MIGs leaders.
In its Oct. 15 deal with Allergan, Allergan’s October 2015 purchase of Aquesys and Alcon/Novartis’ aforementioned acquisition of Transcend Medical. Aquesys received an up-front cash payment of $300 million, an additional $100 million FDA approval bonus (expected to occur before year-end), and another potential $300 million in revenue-based milestones. Total potential deal size equals $700 million.
The current market value of publicly traded Glaukos, which offers the only FDA-approved MIGS device, now stands at about $1 billion. It is expected to generate about $105 million to $110 million in annual revenue this year. So, combining Glaukos’ market value plus the full potential earn-out totals on the aforementioned three private deals could brings the total to about $3 billion.
This excludes the remaining private MIGS company Ivantis, which could fetch $500 million or more when it is acquired. Thus, the total value of the five MIGS companies could exceed $3 billion.
This raises a key question: Does the total valuation by the public and strategic buyers justify this astronomical sum? According to Bill Freeman, a venerable ophthalmic industry consultant from Market Scope, the MIGS market could reach $900 million (900,000 units) by 2021, up dramatically from $100 million (110,000 units) this year.
Today’s collective buyers are paying approximately 35 times MIGS 2016 revenue and nearly four times 2021 revenue. Rapidly growing public medical device companies are typically valued at about five times current revenue, hyper-growers at 10 times revenue.
Clearly, MIGS and glaucoma have emerged from being a “stepchild,” a long ignored segment of ophthalmology.
Several factors have contributed:
- Glaukos’ successful IPO that raised $112 million in June 2015.
- Glaukos’ meteoric revenue growth since its commercial launch in 2013. A blowout first half of 2016, when its revenue soared 60% over last year’s first half, significantly exceeded expectations. The company now forecasts 2016 global sales will exceed $105 million, a remarkable sales performance given that commercial efforts began only four years ago.
- The aforementioned acquisitions of Aquesys and Transcend.
Add in the FDA’s approval of Alcon’s CyPass and Santen’s purchase of InnFocus, and the red – and possibly white – hot MIGS market feels the heat.