Irish back pain medical device group to pull stock market listings

Mainstay Medical cites poor liquidity in shares and cost for decision to take business private

Mainstay Medical, an Irish device company specialising in chronic low back pain, has announced plans to take the listed company private.

The company cited a lack of liquidity in its shares – which are listed in Paris and Dublin – and the costs associated with being a publicly-listed company as reasons for the decision.

It plans to create a new holding structure, based in Dublin, in which current Mainstay shareholders will receive shares on a 1-for-1 basis to their holdings in the listed business.

Mainstay, which is based in Dublin with subsidiaries in Australia, the United States and Germany, is working to commercialise an implantable neurostimulation system, called ReActiv8, designed to treat disabling chronic lower back pain. It works by stimulating muscles supporting the lower back with electrical impulses.

The company floated in April 2014, raising €18 million in an IPO that valued the business at €90 million. But it never surpassed the IPO price of €21.15 a share – itself at the lower end of the pre-IPO range of €20 to €27 – and traded as low as €2.04 late last year before rallying slightly to trade currently at €3.10.

Shares in the company crashed in late 2018 after the failure of a key US clinical trial to show statistically significant improvement in the group receiving therapy against a control group. They have not recovered.

Early-stage institutional investors and insiders held over 83 per cent of the business when it floated and it has struggled to significantly widen its investor base since, with existing investors taking up two-thirds of a subsequent $30 million placing.

“Since the IPO in 2014, there has been limited trading in the company’s ordinary shares,” the company said in a statement. “ Therefore, Mainstay shareholders have not been able to take advantage of the liquidity benefit typically associated with an active trading market for such listings.

It said the lack of liquidity had had a disproportionate impact on the share price, “with poor demand for shares and thin volumes leading to large volatility in price”, noting that most of its shares are “held by investment funds with a long-term investment horizon”.

“The Mainstay board of directors believes that the lack of liquidity has been a significant contributing factor to downward pressure on the price of the company’s ordinary shares. Furthermore the listings require significant expenditure on legal and regulatory advice...”

Mainstay has been in discussions with the Food and Drug Administration, about selling in the key US market, despite the results of the 2018 trial. The company has said it expects a decision by the end of this year.

The company’s 2019 annual report also shows it had cash on hand of $17.4 million at the end of a year, in which losses, though sharply reduced were still running at $22.4 million.

The proposed changes will be put to shareholders at meetings on a date yet to be decided.

Ireland's Fountain healthcare Partners was among the key early investors in the group, along with French venture capital groups Sofinnova Partners and Seventure Partners, Capricorn Venture Partners from Belgium and medical device giant Medtronic and Twin Cities Angels from Minneapolis where the company was founded.