Biotechs Post Better Returns This Week Before An IPO Tech Wave

by: Renaissance Capital IPO Research

Last week's two biotech IPOs - Aquinox Pharmaceuticals (NASDAQ:AQXP) and Recro Pharma (NASDAQ:REPH) - posted an average return of only 6% on their first day of trading on Friday. While Recro has continued to trade poorly, Aquinox has enjoyed a strong week, bringing its IPO return to 25%. Achaogen (NASDAQ:AKAO), which develops antibiotics that treat drug resistant infections, priced at the low-end of the range on Tuesday, but gained 19% on its first day and is up another 14% today. The two biotechs that began trading today have also had positive returns. Dipexium Pharmaceuticals (NASDAQ:DPRX), which has developed a topical cream for diabetic foot ulcers, is trading 17% above issue. Galmed Pharmaceuticals (NASDAQ:GLMD) targets liver diseases with its once-daily oral therapy, and is currently up 6%.

Biotech IPOs in the past two weeks have been notably smaller, raising only $44 million on average, 43% less in proceeds than the sector's average this year. In general, pricing has not been aggressive for biotechs, as most have priced below their midpoint (including four that opened more than 40% below the midpoint). That trend of discounts has contributed to aftermarket returns for biotechs averaging 30%, compared to the year's 21% average. More biotech IPOs are on the way as well; only biotech and tech IPOs are scheduled for next week.

This Week's Biotech Offerings
Company (Ticker) Range IPO Price IPO Price

vs. Midpoint

Deal Size ($mm) First day pop
Achaogen (AKAO) $12-$14 $12.00 -8% $72 19%
Dipexium Pharmaceuticals (DPRX) $12-$14 $12.00 -8% $33 17%
Galmed Pharmaceuticals (GLMD) $12-$14 $13.50 4% $38 6%

A wave of software company IPOs kicks off tonight with the pricing of Castlight Health (NYSE:CSLT), and continues with six more next week. Castlight provides on-demand software to help self-insured employers control healthcare costs, an apt IPO given the amount of tech and healthcare activity so far. Paylocity (NASDAQ:PCTY), a payroll and human capital management SaaS provider, is a direct competitor to Paycom, which filed an S-1 on Monday. Globoforce (THNX) provides cloud-based software that recognizes and rewards employee achievements. Q2 Holdings (NYSE:QTWO) sells its online banking SaaS platform to community banks. Looking to raise $175 million (next week's largest deal), A10 Networks (NYSE:ATEN) provides network devices and software to optimize company data centers. The final two of the tech wave both support global trade, with Amber Road (NYSE:AMBR) selling a SaaS product that helps companies automate import and export processes, and Borderfree (NASDAQ:BRDR) providing an e-commerce platform for US retailers selling abroad.