Week Ahead: Get Ready For A Dose Of High-Growth Healthcare With 7 IPOs

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Includes: CFMS, CNXC, LCRT, NTRA, PIRS, PSWW, TDOC
by: Renaissance Capital IPO Research

As many as 7 companies could go public in the US during the shortened holiday week.

The week's three high-growth health care IPOs that are on the IPO calendar should receive the most interest, especially after device maker Glaukos (NYSE:GKOS) priced above the range and finished up 56% last week.

For a look at the international IPO market, view our new 2Q 2015 Global IPO Review and check back for the US review early this week.

A stock is born: VC-backed pregnancy tests to go public
Natera (NASDAQ:NTRA) plans to raise $100 million, and its proposed $850 million market cap makes it the week's largest company. Backed by Sequoia Capital, Natera claims that its non-invasive pregnancy tests are more accurate than competitors, and can be used 9 weeks in to determine fetal sex and a variety of genetic abnormalities (for e.g., Down syndrome). The company launched its core test in March 2013, and sales skyrocketed 189% to $159 million in 2014, gross profit rose 19 percentage points to 51% and the EBITDA swung positive. Genetic testing companies like Natera have also been racing to develop a highly-lucrative non-invasive blood screen for cancer. Notable M&A include Illumina's (NASDAQ:ILMN) acquisition of Verinata and Roche's (OTCQX:RHHBY) acquisition of Ariosa Diagnostics (AROS). Despite these tailwinds, sales have decelerated, as its former two largest customers, Quest and Progenity, terminated contracts in 2014 to promote competitive products. The area is also highly litigious, and genetic diagnostics IPOs have faced challenges this year: Invitae (NYSE:NVTA) trades below its offer price, two IPOs postponed (AGMX, IDGX) and another (RAIN) has delayed its launch. Our IPO poll takers are skeptical.

The new house call: Tell a doctor through Teladoc
Teladoc (NYSE:TDOC) positions itself as the first public "telehealth" company, offering subscribers the ability to connect with a doctor via phone or internet 24/7 within 10 minutes. With an extensive network of physicians and major contract wins (including Aetna (NYSE:AET) and Pepsi (NYSE:PEP)), Teladoc is the #1 player in a rapidly growing space, and sales rose 75% to $17 million in the first quarter. However, the unprofitable company is still in a transition period: it must improve user utilization to win new contracts, even as the incremental benefit from higher utilization is not particularly beneficial to its bottom line.

The 3D-printed knee
ConforMIS (NASDAQ:CFMS) offers the only fully customizable knee replacement, which it manufactures with 3D printing. Sales grew 36% to $15 million in the first quarter, and its total market size could be as high as $15 billion. While fast-growth medical device companies have attracted investor interest, the company comes with a $280 million accumulated deficit and near-term unprofitability as it pitches its products against industry giants like Stryker, Smith & Nephew and Biomet/Zimmer.

Two dividend plays: Mortgage REIT and coal MLP
Loan Core Realty Trust (BATS:LCRT) plans to raise $300 million in its IPO plus $205 million from GIC Private Limited, Jefferies (a bookrunner) and management in a private placement, as it targets a market cap of $505 million. It has set an offer price of $20 per share. A bet on Chairman and CEO Mark Finerman, the REIT plans to use IPO proceeds to grow its portfolio of commercial mortgages. CNX Coal Resources LP (NYSE:CNXC) operates parent CONSOL Energy's (NYSE:CNX) Pennsylvania mining complex. It had planned to go public last week with a proposed annual yield above 10%, before the coal MLP slashed its valuation by 25% on Friday and set pricing as day-to-day. Coal prices have been driven lower by an increased supply of cleaner alternatives, and last year's much larger coal MLP, Foresight Energy LP (NYSE:FELP), is down 36% from its offer price, -24% year-to-date, -16% in the past three months and -7% in the past month.

Two delayed small-cap IPOs: Anemia biotech and solar project acquirer
Two companies delayed public offerings last week, and may try again this week. Backed by OrbiMed, Pieris Pharmaceuticals (NASDAQ:PIRS) plans to uplist from the OTCQB to the Nasdaq as it moves into Phase 2 trials for iron deficiency in anemic patients with CKD. Solar asset acquirer Principal Solar (OTCPK:PSWW) hopes to uplist from the pink sheets to the Nasdaq.

Renaissance Capital's IPO Calendar - Week of 6/29/2015
Issuer
Business
Symbol
Exchange
Deal Size
$mil
Price Range
Shares Filed
Lead Manager(s)
LoanCore Realty Trust
Greenwich, CT
LCRT
NYSE
$300 $20
15,000,000
Deutsche Bank
J.P. Morgan
Commercial mortgage REIT backed by Jefferies and GIC.
ConforMIS
Bedford, MA
CFMS
NASDAQ
$135 $14-16
9,000,000
J.P. Morgan
Deutsche Bank
Sells fully customized knee replacement implants.
CNX Coal Resources LP
Canonsburg, PA
CNXC
NYSE
$120 $15
8,000,000
BofA Merrill Lynch
Wells Fargo
MLP recently formed by CONSOL Energy to operate its Pennsylvania coal mines.
Teladoc
Purchase, NY
TDOC
NYSE
$112 $15-17
7,000,000
J.P. Morgan
Deutsche Bank
Provides on-demand medical care through video/telephone consultations.
Natera
San Carlos, CA
NTRA
NASDAQ
$100 $15-17
6,250,000
Morgan Stanley
Cowen & Company
Sells non-invasive prenatal DNA tests.
Pieris Pharmaceuticals
Freising-Weihenstephan, Germany
PIRS
NASDAQ
$30 $3.12
9,615,385
Oppenheimer
JMP Securities
Developing a therapy for iron deficiency in anemic patients with chronic kidney disease.
Principal Solar
Dallas, TX
PSWW
NASDAQ
$12 $7-9
1,500,000
Northland Securities
Roll-up planning to acquire 150 MW of solar energy projects in North Carolina.

IPO pipeline update: June hits 1-year record with 10 large IPO filings
37 companies have submitted initial filings so far in June, more than any month since June 2014. Ten more were added to the IPO pipeline last week, including seven with a deal size of $200 million or more; none of the prior week's fourteen filings were that large. Two fast-growing P/E-backed consumer deals came from discount gym franchisor Planet Fitness (NYSE:PLNT) and SkinnyPop popcorn-maker Amplify Snack Brands (NYSE:BETR). Two global packaging companies filed: Ardagh Group's metal can spin off Oressa (ORES) and Carlyle/Madison Dearborn's paper packaging producer Multi Packaging Solutions (NYSE:MPSX). Freeport-McMoRan (NYSE:FCX) filed to spin off its oil and gas business (FMOG) in a potentially $1 billion IPO, while the second-largest residential solar company, Sunrun (NASDAQ:RUN), could raise $500 million as early as July. With $2.8 billion in sales, leading Caribbean mobile provider Digicel (DCEL) is the month's second telecom filer after Ooma (NYSE:OOMA). The initial filing of GC Aesthetics (GCAE.RC) may precede an uptick in breast-related puns from Renaissance IPO news writers. Meanwhile, Seres Therapeutics' (NASDAQ:MCRB) 186% return last week suggests that the biotech frenzy is far from over.

IPO market snapshot
The Renaissance IPO Indices are market cap-weighted baskets of newly public companies. The Renaissance IPO Index has traded up 8% year-to-date, compared to 2% for the S&P 500. Renaissance Capital's IPO ETF (NYSEARCA:IPO) tracks the index, and top ETF holdings include Alibaba (NYSE:BABA), Twitter (NYSE:TWTR) and Hilton Worldwide (NYSE:HLT). The Renaissance International IPO Index has traded up 9% year-to-date, compared to 6% for the ACWX. Renaissance Capital's International IPO ETF (NYSEARCA:IPOS) tracks the index, and the top ETF Holdings include Altice (OTCPK:ATCEY) and Deutsche Annington (OTC:DAIMF).

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.