Visicu IPO shares soar 54.9%

Debut of Baltimore medical technology firm is 2nd-best this year


Riding an improving market for new stocks and investor interest in medical technology advances, Visicu Inc. began life as a public company yesterday with the year's second-most-successful debut, rising 54.9 percent from its opening price.

Shares in the initial public offering were priced at $16, leaped to more than $25 in the first 10 minutes of trading, then leveled off to close at $24.78.

The offering raised $100 million for the Baltimore company, which develops remote monitoring systems for intensive care units.

The closing price valued the company, launched in 1998 by two Johns Hopkins intensive-care specialists, at more than $750 million. The 6.9 million new shares sold yesterday represent about 20 percent of the company; executives and early investors control the balance.

The only other company to get a bigger first-day pop among 44 public offerings this year was Chipotle Mexican Grill Inc., which nearly doubled from its offering price on Jan. 26 after being spun off from McDonald's Corp., according to Renaissance Capital's

Under Armour Inc., the Baltimore maker of sports apparel, posted a first-day pop of 95 percent when it began trading in November, the largest IPO gain for an American company in five years.

"I can't imagine having a better day," said Michael Bronfein, managing partner of Baltimore venture capital firm Sterling Partners, which invested in Visicu in 2000 after Bronfein heard about the company during a golf game. Sterling remains one of Visicu's largest stockholders, with about a 12 percent stake, and Bronfein is a board mem- ber.

As trading in Visicu began at 11:20 a.m., Bronfein said he stared at the Yahoo Finance Web page, clicking "refresh" every few moments to monitor the rise of the stock's price.

The Visicu offering represents a big win for his fund; early investors paid an average of $1.10 a share, according to company filings with the Securities and Exchange Commission.

The first-day surge for Visicu, although larger than for most recent initial public offerings, wasn't particularly surprising, several analysts said. "It's often very difficult to predict short-term movement" for newly traded companies, said Jay Nogueira, a health care analyst with Baltimore mutual fund firm T. Rowe Price, which bought shares in the IPO.

He said the strong debut came from Visicu's "attractive product" and from overall investor interest in technology that can improve efficiency and quality in health care. "People are very excited about this area," he said.

Visicu's system of monitors allows one doctor trained in intensive care to track patients' vital signs and oversee several intensive-care units. With a national shortage of such physicians, or intensivists, most of Visicu's hospital customers use the system to provide coverage at night, as a supplement to live oversight during the day.

"They certainly have a lot going for them," said John E. Fitzgibbon Jr., an independent IPO analyst based in New Jersey. "Company revenues have really taken off, and they've plopped big time into the profit column."

From only one customer in 2003 (a three-hospital system), Visicu now has its monitors in nearly 100 hospitals. Revenue surged from $2.2 million in 2003 to $5.5 million in 2004 to $18.4 million in 2005.

The company booked its first profit in 2005, $9.7 million, due largely to tax breaks from losses in previous years, but analysts expect the company to post an operating profit this year.

Beyond the particulars of Visicu, Fitzgibbon said, market conditions were good for the offering. The Nasdaq stock index is at a five-year high, he said, and "the Nasdaq is a barometer of the IPO market," since both Nasdaq and IPOs are heavily weighted with tech stocks. One note of caution was sounded by Scott Reeves, personal finance editor for, who wrote last week that Visicu offers "great promise," but the potential "comes wrapped in uncertainty and risk." Threats include challenges from two competitors to Visicu's patent and tight hospital budgets, which could limit future demand, he wrote.

But Linda Killian, a portfolio manager for IPO Plus Aftermarket Fund, at Renaissance Capital in Connecticut, said she thought the patent challenges likely represented only a "nuisance."

Visicu's strength, she said, is in the system to alert the doctor automatically to significant changes in vital signs. "You're not buying hardware," she said. "Basically, it's their intelligence they're putting in there."

She said the first-day surge does not indicate that the offering was underpriced.

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