FoxHollow has strong debut

FoxHollow has strong debut

Byline: Alex Lash

FoxHollow Technologies Inc. can scrape plaque from arteries, and now it’s scraping up cash on the public market as well.

The medical device maker went public Thursday, Oct. 28, with 4.5 million shares at $14 a share, the high end of the $12 to $14 range it had announced earlier this month. So far the offering has investors’ blood pumping. The stock opened at $16.25 and as of 2 p.m. EDT had reached $20.72, a 48% jump.

The Redwood City, Calif., company makes and sells a catheter system that removes plaque to reopen narrowed or blocked arteries, most commonly in the legs and pelvis. The product is called the SilverHawk Plaque Excision System and began full commercial rollout early this year.

The company made clear in its prospectus that the avenues for market expansion are limited. The SilverHawk is cleared by the Food and Drug Administration only for use in peripheral arteries. Doctors might employ it in other procedures, but such “off-label” use is not officially sanctioned. FoxHollow warned potential investors in documents filed Wednesday, the day before the IPO, that it recently circulated marketing materials to thousands of doctors promoting the SilverHawk for uses that the company now says should not have been promoted.

Medical and pharmaceutical companies must be careful in how they market their products to doctors. If aggressive marketing leads to off-label usage and such usage goes awry, companies could be held liable.

To use the SilverHawk for cleanup of coronary and carotid arteries, the company would need to submit the device to further testing and government approval. An earlier trial to test the device in coronary arteries was halted after 28 out of 172 patients suffered adverse events, including eight deaths, which the company attributed to “a number of factors, including the patients’ overall poor health,” public documents said.

In the first three quarters of 2004 FoxHollow sold more than 12,000 systems to hospital customers, for net revenue of $23.9 million and a net loss of $22.4 million, according to its prospectus filed Wednesday with the Securities and Exchange Commission. The company has posted increased net losses in the past three calendar years, from $5.4 million in 2001 to $14.3 million in 2003.

FoxHollow will use about $23 million of the proceeds from the IPO for sales and marketing initiatives for the SilverHawk. It will spend $5 million on research and development and the remainder on general corporate purposes.

J.P. Morgan, Piper Jaffray & Co., Thomas Weisel Partners LLC and William Blair & Co. LLC are the underwriters for the offering. They have the option to buy up to 675,000 additional shares.

Wilson Sonsini Goodrich & Rosati PC of Palo Alto, Calif., is representing FoxHollow. The company disclosed in its prospectus that members and associates of Wilson Sonsini have a financial interest equivalent to less than 0.3% of FoxHollow shares. Latham & Watkins LLP of Menlo Park, Calif., is counsel for the underwriters.

COMPANY: FoxHollow Technologies Inc.

COMPANY: J.P. Morgan

COMPANY: Piper Jaffray & Co.

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