Mixed Results for the U.S. IPO Market

by: Renaissance Capital IPO Research

Eight US companies approached the public markets this week and were met with mixed reactions from IPO investors, while five others that had also been scheduled on the IPO calendar ended up delaying their offerings. If all thirteen IPOs had been completed, it would have been the busiest week for US IPOs seen since 2007.

Epocrates (NASDAQ:EPOC) and NeoPhotonics (NYSE:NPTN) were this week's clear winners, with both IPOs pricing above their proposed midpoints and posting strong returns. Epocrates (EPOC), which operates an ad-supported mobile drug reference application used primarily by US physicians, raised $86 million on Tuesday after pricing 5.4 million shares at $16, above the initial $13 to $15 range. The stock soared 37% in its debut as investors continued to express interest in the dynamic, fast-growing mobile space. NeoPhotonics (NPTN), which makes optical modules and subsystems for high-speed data networks, also performed well, rising 21% on its first day of trading. The San Jose-based chip company is well-positioned to benefit from strong secular demand for increased capacity, and also boasts low-cost manufacturing operations in China. The company raised $83 million.

By contrast, early stage companies Endocyte (NASDAQ:ECYT), BG Medicine (NASDAQ:BGMD) and Pacira Pharmaceuticals (NASDAQ:PCRX) were forced to slash their offer prices in order to successfully complete their deals. Endocyte (ECYT), which is developing an ovarian cancer drug entering Phase 3, sold 12.5 million shares at $6 on Friday morning after modifying its IPO terms twice in amendments filed with the SEC. The biotech had originally anticipated a price range of $13 to $15. Biomarker diagnostic test provider BG Medicine (BGMD) and post-surgical pain drug developer Pacira Pharmaceuticals (PCRX) both priced their deals at $7, a significant decrease from their initially suggested price ranges of $13 to $15 and $14 to $16, respectively.

and MedQuist Holdings (OTCPK:MEDH) similarly faced pricing pressure. Orthopedic implant provider Tornier priced at the low end of its $19 to $21 range and traded down 5% on its first day of trading, while medical transcription services provider MedQuist priced its IPO 27% below the midpoint of its $10 to $12 range in addition to downsizing its deal. Trunkbow International (NASDAQ:TBOW), the only China-based IPO this week, raised $20 million and fell roughly 5% in its debut. The company provides integrated technology platforms for China's big three mobile operators.

Five other companies that had also scheduled their IPO pricings for this week ended up delaying their deals. Dental implant provider BioHorizons (BHZN) postponed its $90 million offering, while AcelRx (NASDAQ:ACRX), China Century Dragon Media (NYSEMKT:CDM), Imperial Holdings (IFT) and Zuoan Fashion (ZA) pushed back their pricings to next week. Including these four deals, there are 11 IPOs scheduled on next week's IPO calendar. Health care, which has recently dominated the IPO space, accounting for six of this week's eight deals, will represent four IPOs next week. The crop also includes the highly anticipated $2.2 billion IPO by Kinder Morgan (NYSE:KMI), which is expected to be one of this year's largest US IPOs; the leading owner and operator of oil and gas pipelines intends to sell 80 million shares at a range of $26 to $29 with Goldman Sachs and Barclays serving as lead managers on the deal.