Monogram Orthopaedics (NASDAQ: MGRM) launched its IPO on NASDAQ yesterday at $7.25 a share, started trading at $11.75 and the after hours price reached $22.85, a 94% rise. This will be described as a great success and of course it isn't, this sort of stock pop is a failure. For selling something at $7.25 - the amount the company received before costs - which could have been sold at $22.85 only 12 hours later is a failure. The initial price was too low. That's not the way The Street reckons it - a pop in an IPO is regarded as a success - but that is the economic reality of it.
As to what Monogram actually does it's a cute idea. It's one of those things where the supporting technologies have all come together at around the same time. Terry Pratchett's “steam engine time” comes to mind on this. Robotics, 3D printing and so on have all developed to the point where the idea is possible.
Knee replacements are becoming ever more common - we're all living longer, joints crumble as we do so. However, everyone's knee is different and also fails in different ways. So, putting a standard part in as a replacement is not medically optimal, even if it is economically so. But, if we use the robotics to design and measure the fine details, then use 3D printing to make, to order (that's the “monogram” part, a little joke in the company name there) the knee part to that person specific design we can gain a better fit and therefore a better operating knee replacement.
Monogram Orthopaedics stock price from NASDAQWhile the idea seems logically sound - there is no doubt that the basics of the technology are indeed out there - there's still something of a path to follow here. It's necessary to get the FDA to sign off: “FDA approval is required to market these products, and the Company has not obtained FDA approval for any of its robotic products, and it cannot estimate the timing, or assure the ability, to obtain such clearances.” That's largely what the money raised will pay for - trying to get the FDA to sign off here.
It's also worth noting that the basic technological idea is not limited to knees - hip replacements work much the same way, they're better when individually designed, demand is rising and so on. So there's a wider application possible. On the other hand, as with such medical systems - as opposed to drugs - there will be competition. Any patents will apply to the precise method of doing this thing, not to the idea of doing this thing.
In the medium term the real, objective, determinant of Monogram Orthopaedics' share price will be success at persuading the FDA to allow marketing.
