Much has been written about the recent explosion of biotech IPOs, and last week they accounted for seven of the ten IPOs that priced. Together, they had an average deal size of less than $70 million, and averaged a 16% return. Revance (NASDAQ:RVNC), a biotech developing a non-injectable form of Botox, had the third-best first-day return of the year (68%), trailing only two biotechs that went public in the previous week. However, a majority of the biotech IPOs failed to produce a positive return (two were flat and two fell 8-14%). The biotech anomaly may have overshadowed the level of energy IPO activity this year. One in five IPOs has been an energy company, and they have accounted for 37% of proceeds. More are on the way, as Sundance Energy Australia (Pending:SNDE) set terms for a $136 million IPO and Antero Midstream Partners (NYSE:AM) submitted an initial filing for a $500 million IPO.
Revance promises a non-injectable fountain of youth
Last week’s clear winner was Revance Therapeutics, which ended the week up 75% after pricing at the high end of the range. Auspex Pharmaceuticals (NASDAQ:ASPX) also had a noteworthy performance, gaining nearly 50% by the end of the week. The company is in phase 3 trials for a deuterium-enhanced version of an approved treatment for chorea. GeoPark (NYSE:GPRK) represented the year’s first South American play, but the oil and gas E&P saw little interest due to investors’ mounting concerns around emerging markets. uniQure (NASDAQ:QURE), the first company to achieve regulatory approval for a gene therapy treatment, aggressively priced 21% above the midpoint of the range, only to drop 14% by the end of the week. The other gene therapy biotech this year, Celladon (NASDAQ:CLDN), is trading 6% below its IPO price. Altogether, the ten pricings last week were more than were seen in all of February 2013, when eight IPOs priced.
|IPO pricings (week of February 3, 2014)|
|Company (Ticker)||Business||Deal Size ($mm)||IPO Price vs. Midpoint||Return as of 2/7|
|Revance Therapeutics (RVNC)||Enhanced version of Botox||$96||7%||75%|
|Auspex Pharmaceuticals (ASPX)||Treatment for CNS disorders||$84||9%||47%|
|Continental Building Products (NYSE:CBPX)||Drywall manufacturing||$165||-18%||24%|
|Eleven Biotherapeutics (NASDAQ:EBIO)||Dry eye disease treatments||$50||-29%||12%|
|Ladder Capital (NYSE:LADR)||South American oil and gas E&P||$225||0%||2%|
|GeoPark (GPRK)||Abuse-deterrent pain treatment||$95||-22%||0%|
|Egalet (NASDAQ:EGLT)||Immunotherapy for renal cell carcinoma and HIV||$50||0%||0%|
|Argos Therapeutics (NASDAQ:ARGS)||Commercial real estate mortgage origination||$45||-43%||0%|
|Genocea Biosciences ((NASDAQ:GNCA))||Vaccines using T cell immune responses||$66||-8%||-8%|
|uniQure (QURE)||Orphan disease gene therapy||$92||21%||-13%|
Four relatively small deals add to the IPO calendar
Only four companies set terms last week, seeking a combined $420 million. Installed Building Products (NYSE:IBP) expects to price this week in an effort to raise $135 million. It is the second largest residential insulation installer in the US, and the third IPO this year hoping to capitalize on the housing recovery after The New Home Company (NYSE:NWHM); (up 16% from its IPO price) and Continental Building Products (CBPX); (+24%). Sundance Energy Australia (SNDE), an oil and gas E&P operating in Texas, Oklahoma, Colorado, and North Dakota, will continue this year’s string of energy IPOs. The company currently trades on the Australian Securities Exchange under the ticker SEA. Concert Pharmaceuticals (NASDAQ:CNCE) expects results from its Phase II trials of a diabetic kidney disease treatment in the 1H14. Auspex’s strong performance (+47%) could bode well for Concert, given the two companies’ shared focused on deuterium chemistry. Inogen (NASDAQ:INGN), which makes portable oxygen concentrators, launched last week. Coming off a 60% increase in revenues for the nine months ended September 30, the company believes its battery-operated portable oxygen concentrators for patients with hypoxemia can steal share from oxygen tanks, whose fixed supply can limit mobility.
|IPOs setting terms (week of February 3, 2014)|
|Company (Ticker)||Business||Deal Size ($mm)||LTM Sales ($mm)|
|Sundance Energy Australia (SNDE)||Onshore oil and gas E&P||$136||$67|
|Installed Building Products (IBP)||Residential insulation installer||$135||$404|
|Concert Pharmaceuticals (CNCE)||Treatments for spasticity and kidney disease||$75||$24|
|Inogen (INGN)||Portable oxygen concentrators||$75||$70|
Major spinoff from one of last year’s largest IPOs files
Antero Midstream Partners, a spinoff of Antero Resources’ (NYSE:AR) midstream energy assets, filed for a $500 million IPO. Warburg Pincus indirectly owns nearly one third of the company, which grew revenues to $35 million during the nine months ended September 30, 2013 from $0.2 million during the prior year period. WL Ross-backed petroleum shipping company Diamond S Shipping (Pending:DSG) filed for a $100 million IPO. Another WL-Ross backed company, Talmer Bancorp (NASDAQ:TLMR), is expected to price this week. The Rubicon Project (NYSE:RUBI), the largest digital advertising platform and marketplace, submitted an initial filing to raise $100 million. For the first nine months of 2013, its revenue grew nearly 50% to $56 million. Finally, the adventure camera maker GoPro generated buzz when it announced a confidential filing on Friday.
|New IPO filers (week of February 3, 2014)|
|Company (Ticker)||Business||Deal Size ($mm)||LTM Sales ($mm)|
|Antero Midstream Partners LP (AM)||Midstream asset spin-off of Antero||$500||$36|
|Diamond S Shipping Group (DSG)||WL Ross-backed petroleum shipping||$100||$178|
|The Rubicon Project (RUBI)||Online advertising platform||$100||$75|
|Bio Blast Pharma (BIOB.RC)||Rare disease treatments||$35||$0|
|Dipexium Pharmaceuticals (NASDAQ:DPRX)||Antibiotic for diabetic foot ulcers||$35||$0|
|Galmed Pharmaceuticals (NASDAQ:GLMD)||Treatment for liver disease and gallstones||$35||$0|
|Tecogen (NASDAQ:TGEN)||Natural gas-powered cogeneration systems||$5||$15|
IPO market snapshot
So far this year, the Renaissance IPO ETF, a basket of newly public companies that trades under the symbol IPO, has gained 1%. The 27 IPOs in 2014 have raised $6.2 billion and produced an average return of 18% from the IPO price. There have been 54 IPOs in the past 90 days, with total proceeds of $14.2 billion and an average return of 34% from the IPO price, and a post-IPO return of 11%, as measured by the Renaissance IPO ETF. The active IPO pipeline includes 97 companies looking to raise a total of $24.5 billion.