Esaote Biomedica finds strong demand for shares on Italian stock exchange

Stock jumps 59% on Milan bourse after offering

Italian medical device manufacturer Esaote Biomedica receiveda warm reception on the Milan stock exchange last month when thecompany floated a large number of shares to the public. Tradingin Esaote shares was suspended several times by exchange authoritieson the first day of the offering due to strong demand, accordingto Reuters.

The Genoa-based company announced earlier this year that itwas planning a public offering that would make about 49% of itsstock available on public markets. The remaining 51% will continueto be held by institutional and industrial investors, includingItalian contrast agent manufacturer Bracco of Milan. Bracco acquireda 15% stake in Esaote in December (SCAN 2/14/96).

Esaote was spun off as a privately held independent companyin 1994 when a management-led group bought the vendor from Italianaerospace conglomerate Finmeccanica (SCAN 2/16/94). Esaote ownsU.S. ultrasound vendor Biosound, and the company's Artoscan dedicatedMRI scanners are sold in the U.S. by Lunar.

Esaote began its public offering June 24, when it issued 22million shares priced at 3900 lira a share ($2.54). Six millionshares were offered to the public, while another 14 million weresold to institutional investors around the world. The sale hadan overallotment option of two million.

The price of the public shares quickly rose to 6350 lira, anincrease of 59%, according to Reuters. The newswire said the jumpmay reflect the success new stock issues have experienced on theMilan bourse as investors look for new opportunities in a languidmarket. Esaote's American Depository Shares have been priced at$25.

Esaote had hoped to raise about $35 million, to be used forextinguishing debt and for other investments. In the offering'sprospectus, the company detailed the success it has experiencedin marketing its products.

The company had net sales in 1995 of 258 billion lira ($168million), an increase of 11% over revenues of 231.5 billion lira($150.7 million) in 1994. Esaote's net income in 1995 was 8 billionlira ($5.2 million), compared with 3.3 billion lira ($2.1 million)in 1994. Almost all of the company's revenue growth has been dueto higher sales outside Italy, and 1995 was the first year thatinternational sales exceeded those made to Italian customers.

Sales of ultrasound systems made up 60% of Esaote's revenuelast year, Artoscan contributed 11%, EKG/EEG devices provided12%, and services and other revenue made up 17%, according tothe prospectus.

As of December 1995, the company had sold 140 Artoscan units.In addition, a multicenter study under way in Germany comparingthe diagnostic accuracy of dedicated scanners like Artoscan withwhole-body scanners for joint studies seems to be going well.Preliminary results of the study presented at the German RadiologyCongress in May were encouraging, particularly with respect toknee studies, according to the vendor. Final results of the studywill be published in the next several months.

Esaote is conducting additional research to develop new applicationsfor Artoscan, such as shoulder studies, that would be sold asmodules to the scanner's installed base. The company is also evaluatingthe utility of the system in diagnosing breast lesions. In 1996,Esaote hopes to ramp up sales of Artoscan in developing countries,especially Brazil. It also sees Japan as an important new market.

In ultrasound, Esaote introduced the AU4 Idea scanner in 1994and in 1995 it began marketing AU3 Partner. This year, the companyplans to introduce a multidisciplinary version of AU3 that issuitable for a broad range of radiology, cardiology, ob/gyn, andvascular applications. In 1997 it aims to debut an enhanced versionof AU4 that is optimized for contrast media studies, a projectit is working on with Bracco. Finally, the company plans to releasea new high-end scanner in 1998.