IPOs This Week: 6/18/18

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Includes: APTX, AUTL, AVRO, ECOR, EIDX, EPRT, IIIV, KZR, MGTA, XERS, YQ
by: B&B Market
Summary

The week of 6/18/18 is scheduled to IPO 12 companies.

The majority of companies aiming to list are in the biopharma industry.

After last week's news of AT&T's approval to buy out Time Warner and the acquisition of Adaptive Insights by Workday, I will discuss the acquisition environment for IPOs.

This week is a busy one for IPOs. There are 12 companies that are planning to go public this week, the majority of which are biotech or pharmaceutical firms. In fact, 8 of the 12 are in the medical space. As we have seen in previous weeks, this is the general trend as these companies are seeking funding to move along in clinical trials.

However, for this week's opening segment, I would like to focus on the acquisition environment for IPOs, given this was very relevant in the market last week. AT&T (NYSE:T) bought Time Warner (NYSE:TWX) for $85.4 billion and Adaptive Insights (ADIN) was purchased by Workday (NYSE:WDAY) for $1.55 billion, thus canceling the company's public offering.

M&A activity has been growing ever since reaching its lows right after the financial crisis. This is coinciding with a majority opinion from start-ups that an acquisition is the end goal. According to a study on startups by CNN Tech:

"The majority of the startups surveyed (56%) said they expected to be acquired; 19% said 'stay private,' and 8% said they didn't know."

At the same time, global M&A activity has grown 29% y/y to $417.5 billion. This total is from both M&A loans and DCM (Debt Capital Management) firms. The picture below shows the breakdown of M&A loans, comparing IG (investment grade), non-IG, and IG activity (# of deals).

The size of deals has also increased, making larger deals the new normal. Last year the average deal size was $687 million. This year, the average has increased 37% to $943 million.

Source: MoneyControl

*NOTE: I have broken the "Scheduled IPOs" section into "Summary" and "Use of Funding" for each company. I will also be releasing a separate article for this week's "Potential" company so there can be a more in-depth look. Please provide feedback/opinions on these changes and if they are more informative.

Scheduled IPOs

Aptinyx (APTX)

Summary

Aptinyx is a clinical-stage biopharmaceutical company focusing on the treatment of brain and nervous system disorders. The company's lead candidate, "NYX-2925", is in two different Phase 2 trials. One for the treatment of "Diabetic Peripheral Neuropathy", and the other for the treatment of "Fibromyalgia". There are two other drugs in the pipeline: "NYX-783" (PTSD) and "NYX-458" (Parkinson's).

Use Of Funding

Proceeds from the IPO are expected to be in the range of $71.4-82.6 million (w/ underwriter option exercise). The funds will be allocated as follows:

  1. $15 million to fund ongoing Phase 2 trials for NYX-2925
  2. $13 million to fund NYX-783 through both Phase 1 and Phase 2 trials
  3. $30 million to fund NYX-458 through Phase 1 and into Phase 2 trials
  4. Remainder to be used for clinical studies for NMDAr-dependent biomarkers

Autolus Therapeutics (AUTL)

Summary

Autolus Therapeutics is a biopharmaceutical company focusing on the development of "T-cells" to treat cancer. The pipeline consists of 5 programs shown below:

Source: F-1

Use Of Funding

Funds raised from the IPO are expected to be ~$117 million. The F-1 does not disclose exact allocations, but the planned use of the funds is as follows:

  1. Contributions to AUTO1, AUTO2, AUTO3, and AUTO4 studies
  2. Develop AUTO3 NG, AUTO5, AUTO6 NG, and AUTO7 through proof-of-concept
  3. Fund generic clinical studies for future products
  4. Fund manufacturing activities

AVROBIO (AVRO)

Summary

AVROBIO is a Phase 2 clinical stage company focusing on the use of gene therapies to treat rare diseases on low doses. The lead candidate, "AVR-RD-01", is aimed to combat Fabry disease. The remainder of the pipeline is AVR-RD-02, 03, and 04 aimed to combat Gaucher disease, Pompe disease, and Cystinosis respectively.

Use Of Funding

Estimates for raised proceeds are in the range of $67.5-77.5 million, allocated as follows:

  1. $13.4 million to fund Phase 2 trials for AVR-RD-01
  2. $12.9 million to fund Phase 1 + 2 trials for AVR-RD-02
  3. $3.2 million to fund pre-clinical trials for AVR-RD-03
  4. $5.4 million to fund pre-clinical trials for AVR-RD-04
  5. $28 million for manufacturing expenses
  6. $32.6 million for R&D

Eidos Therapeutics (EIDX)

Summary

Eidos Therapeutics is a clinical stage biopharmaceutical company that seeks to combat diseases caused by transthyretin amyloidosis (ATTR). The lead candidate, "AG10", is designed to stabilize TTR and as a result will combat ATTR. This is the company's main product and has 3 different trials in progress for potential treatments.

Use Of Funding

Estimates for raised funds are ~$90.2 million, which will be allocated as follows:

  1. 80% of funds to be used to progress through the various clinical trials
  2. Remaining funds are for general purposes

ElectroCore (ECOR)

Summary

ElectroCore is a "commercial-stage bioelectronic medicine company with a platform non-invasive vagus nerve stimulation therapy initially focused on neurology and rheumatology." Its therapy, "gammaCore", is FDA cleared for treatments of migraines and episodic cluster headaches.

Use Of Funding

The company estimates to raise $56.5 million to be used for the following:

  1. $35 million to fund commercialization activities
  2. $10 million to expand clinical program/trials
  3. $3 million to expand the distribution channel

Essential Properties Realty Trust (NYSE:EPRT)

Summary

Essential Properties Realty Trust is a real-estate company that acquires, owns and manages single-tenant properties. The company focuses on restaurants, car washes, medical services, convenience stores, etc. The company generates $75.7 million in rent off of 530 properties each year.

Use Of Funding

Management expects to raise ~$588 million from listing, which will be used for the following:

  1. Repay $288 million of debt
  2. General purposes

LF Capital Acquisition (NASDAQ:LFACU)

Summary

LF Capital Acquisition is a blank-check acquisition company. It aims to acquire financial companies, specifically within the commercial banking industry. Management is Baudouin Prot, Philippe De Backer, and Scott Reed. Mr. Prot was a chairman for BNP Paribas (OTCQX:BNPQF), one of the largest banks in the world. Mr. Backer was the co-founder of "Clearly", a digital bank. Mr. Reed is the co-founder of private equity firm BankCap Partners.

Use Of Funding

The company is aiming to raise ~$140 million. However, because of the type of company LFACU is, NASDAQ requires 90% to be placed in a trust account. The account will be around $136 million, and be invested in US-government Treasury bills with a 180-day maturity or less. Management expects interest earned to be around $1 million per year, assuming a 0.8% interest rate.

i3 Verticals (IIIV)

Summary

i3 Verticals is a software and payments solution company, focusing on small- and mid-sized businesses in vertical markets. Target markets include education, non-profit, public sector, property management and healthcare. The company processed $10.3 billion in payment volume in 2017, growing at a CAGR of 67% since 2014 according to the S-1. The platform allows clients to accept electronic payments through a "sub-merchant contract" from i3 Verticals' "master merchant account". This eliminates the need to establish individual merchant accounts.

Use Of Funding

The company expects to raise ~$74.2 million from its listing, which will be used as follows:

  1. $10.5 million to repay debt (Mezzanine Notes)
  2. $16.1 million to repay debt (Junior Subordinated Notes)
  3. $50.4 million to repay a portion of the revolving loan (Senior Secured Credit Facility)

Management also intends to repay another $2.8 million of the revolving loan from exercised warrants.

Kezar Life Sciences (KZR)

Summary

Kezar Life Sciences is a clinical-stage biotechnology company focusing on the treatment of autoimmunity and cancer. The lead candidate, "KZR-616", is a selective immunoproteasome inhibitor. Early studies have indicated that this therapy reduced autoimmune disease within animals with lupus, rheumatoid arthritis, multiple sclerosis, and inflammatory bowel disease. The company is focusing on the treatment of "Systemic Lupus Erythematosus", "Lupus Nephritis", and "Idiopathic Inflammatory Myopathies".

Use Of Funding

The funds raised from the IPO are estimated to be $61.3 million, allocated as follows:

  1. $20 million to fund lupus/lupus nephritis Phase 1b and Phase 2 trials
  2. $14 million to fund Idiopathic Inflammatory Myopathies and additional programs into Phase 1b and Phase 2 trials
  3. $14 million to advance discovery and pre-clinical trials

M17 Entertainment (NYSE:YQ)

Summary

M17 Entertainment is the "...largest live streaming platform by revenue in Developed Asia with a market share of 19.2% in the first quarter of 2018...". The company operates within "Developed Asia", which includes Taiwan, Japan, Hong Kong, Singapore, and S. Korea. Its platform, 17 Media, has over 33 million subscribers with 1 million MAUs.

Use Of Funding

YQ priced last week at $8 per share, raising $60 million but postponed trading. Since the funds were lower than originally planned ($73.3 million), the list below will be the original allocation planned.

  1. $60 million for expansion in Japanese and other markets
  2. $10 million for content development

Magenta Therapeutics (MGTA)

Summary

Magenta Therapeutics is a clinical-stage biotechnology company that focuses on the advancement of bone marrow transplant technology. The company develops its therapies around a stem-cell technology, with its lead candidate, "MGTA-456", focusing on blood cancers, inherited metabolic diseases, and sickle cell disease. The second drug in the pipeline, "MGTA-145", is aimed to make the process of harvesting stem-cells easier and more efficient for physicians.

Use Of Funding

The company is aiming to raise $89.8 million from its listing. The funds will be allocated as follows:

  1. $39 million to fund potential product candidates and studies
  2. $14 million to complete Phase 2 of MGTA-456
  3. $9 million to fund the first in-human study and proof-of-concept for MGTA-145

Xeris Pharmaceuticals (XERS)

Summary

Xeris Pharmaceuticals is a specialty pharmaceutical company that focuses on injectable and infusable drug formulas through its "XeriSol" and "XeriJect". The lead product, "Glucagon Rescue Pen", combats hyperglycemia with the first ready-to-use glucagon. Three Phase 3 trials have been completed and the company is now waiting for FDA feedback.

Use Of Funding

The company aims to raise $67.5 million. These funds, combined with existing cash/equivalents, will be allocated as follows:

  1. $40 million for the commercial launch of the Glucagon Rescue Pen
  2. $40 million to advance other pipeline candidates

Conclusion

This week is expected to be a busy one, with 12 companies set to list. Given the large amount of companies listing, it would not be surprising to see a couple involved in M&A deals in the near future, given the rise in global deal activity. In a following article, I will write about the potential of i3 Verticals, and possibly touch on potential within Essential Properties. I will not write about M17 Entertainment, as I did in last week's installment and have released a separated article ("There's Some Concern Under TheHood").

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.