Taking your company public is a significant milestone that offers exciting growth opportunities and meaningful access to capital. However, navigating the initial public offering (IPO) process can be complex and requires careful planning and strategic execution. Ceribell’s recent IPO, the first >$50M MedTech IPO since October 2021, provides valuable lessons for companies considering this path.
Ceribell IPO: A Snapshot
Ceribell is a commercial-stage medical technology company focused on transforming the diagnosis and management of patients with serious neurological conditions. The company has developed the Ceribell System, a novel, point-of-care electroencephalography (“EEG”) platform specifically designed to address the unmet needs of patients in the acute care setting. By combining proprietary, highly portable, and rapidly deployable hardware with sophisticated artificial intelligence (“AI”)-powered algorithms, the Ceribell System enables rapid diagnosis and continuous monitoring of patients with neurological conditions. The Ceribell System is FDA 510(k) cleared for indicating suspected seizure activity and currently utilized in intensive care units and emergency rooms across the U.S.
According to company filings, Ceribell is addressing unmet needs within a market valued at ~$2B and operating at a ~$68M annual revenue run rate with an approximately 86% gross margin.
On October 10, 2024, Ceribell (NASDAQ: CBLL) successfully priced its $207M IPO with BofA Securities and J.P. Morgan acting as bookrunning underwriters. The upsized offering was significantly oversubscribed and priced at $17.00 per share, above the initially-filed price range. By the end of the first trading day, CBLL surged 47% to $25.00, and has traded higher at points since then.
What Companies Can Learn from Ceribell’s IPO
If your company is contemplating going public, there are several insights you can glean from Ceribell’s IPO process to support your own success. Let’s break these down:
- Investor Demand for Quality New MedTech Issuances is High
The demand Ceribell experienced during and after its IPO is a key indicator that investors are eager for new, high-quality MedTech opportunities. Investors, both specialists and generalists, are looking for MedTech companies with demonstrated success in substantial markets, compelling growth stories, strong leadership, and credible paths to profitability. - P&L Scrutiny is Also High: Consistent Revenue Growth ALONG WITH a Credible Path to Profitability is Critical
Ceribell has historically delivered consistently impressive sequential revenue growth, with a track record of success leading to its ~$68M current annual revenue run rate. Notably, this represents greater scale at IPO than many high-growth MedTech IPO precedents. In the wake of the last IPO class and current market volatility, it is clear that investors have become more focused on a company’s ability to achieve profitability under relatively conservative assumptions. Ceribell’s successful IPO was driven in part by a well-defined, credible strategy for achieving profitability, supported by a high gross margin and track record of steadily increasing revenue.
Tip: Focus on building a history of consistent revenue growth before going public. Demonstrating continued growth, in revenue and across KPIs, leads to a high degree of model predictability and will make the investment opportunity more attractive to investors. Also consider that investors will likely apply more conservative assumptions with respect to expense modeling – meet them where they are in your messaging. - Model Predictability More Important Than Ever for Analysts
The bar has risen for covering analysts, as their buy-side clients are looking for a higher degree of model confidence and realistic forecasts. This means defending not only your revenue build but also your expense and pipeline assumptions.
Tip: Be prepared for rigorous analyst scrutiny. Ensure your financial projections are well-founded and balanced enough to withstand fluctuations across the assumption set. Investors want to see a scalable business model with efficient operations that can maintain an attractive growth profile while generating reasonable leverage in the relatively near term. - Build Relationships with Investors Early On
Ceribell’s IPO success was also a result of long-term relationship building with the investment community. The company worked closely with its team at Gilmartin well before the IPO process to ensure management was consistently engaged with investors at the right time, balancing Street exposure with the operational demands of a high-growth company. Knowing who to meet, and when (or not) is critical, as it enables teams to build credibility well before the roadshow in the most effective manner possible.
Tip: Begin building relationships with potential IPO investors at least one year prior to your IPO. Strong relationships can help secure a successful outcome, as investors are more likely to trust a management team they know and have confidence in. To build that confidence, work with your advisors to begin thinking and messaging like a public company before going public. Engage with key investors quarterly or semiannually and only lay out expectations which you can confidently meet or exceed. - Flexibility Is Key in Volatile Markets
Market conditions are unpredictable, and flexibility is essential. Ensure adequate capital and optionality to remain opportunistic throughout the IPO process.
Tip: Stay flexible in your IPO planning. Be prepared for market shifts, and ensure you have the capital structure to weather any turbulence. It’s crucial to maintain ongoing dialogue with your board throughout the process to ensure alignment on strategy. Drafting an S-1 and working on key operational readiness priorities before the IPO organizational meeting can help you maintain flexibility without incurring more significant costs prematurely. - The Market Values the Right Story
Perhaps most importantly, Ceribell’s IPO demonstrates that the market is willing to assign premium valuations to companies with a strong track record and the right story. Investors are looking for companies with strong leadership, a clear vision, and a thoughtful approach to using IPO proceeds to further scale its business. At its current market capitalization, Ceribell is amongst the highest valued growth MedTech companies in terms of EV/Sales multiples.
Tip: Craft a compelling, comprehensive narrative around your company. Investors are more likely to participate in your IPO if they believe in your vision and the value you bring to the market.
Conclusion
Ceribell’s IPO is an excellent case study for any MedTech company preparing to go public. By focusing on consistent revenue growth and reasonable OpEx assumptions, articulating a clear path to profitability, and building strong investor relationships, your company can enable a successful IPO.
As you plan your journey toward the public markets, work closely with your strategic advisors and IR team. A comprehensive strategy that balances company objectives with tactical execution before, during, and after the offering is key to long-term success.
Gilmartin Group partners with healthcare and life sciences companies at every step of the IPO process, providing expert guidance and support to ensure a success. To find out more about how we partner with our clients, please contact our team today.
Authored by: Brian Johnston, Principal, Gilmartin Group