U.S. IPO Weekly Recap: Biotechs Boom In A 13-Deal Torrent

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Includes: APTX, AUTL, AVRO, CWK, ECOR, EIDX, EPRT, ESTA, IIIV, KZR, LFACU, MGTA, TBRGU, TLRY, TWLVU, XERS
by: Renaissance Capital IPO Research

10 IPOs brought in $1.3 billion this past week, along with 3 SPACs raising $540 million. With a flood of biotechs, most of the IPOs this week had heavy insider buying, and no revenue. They traded very well, however, averaging a 27% gain. The week's worst IPO lost only 3%. Unusually, 8 of the 10 raised more proceeds than expected, and only 1 raised less.

Biotechs Are Booming

"Biotech week" was largely a success: most of the 8 development-stage health care companies priced upsized IPOs, and the group averaged a 30% return, with Autolus (NASDAQ:AUTL) and AVROBIO (NASDAQ:AVRO) at the top. In the past few weeks, returns from 2018 biotech IPOs have improved drastically, now averaging 28%.

The white-hot tech sector also saw one IPO: i3 Verticals (NASDAQ:IIIV) gained 33%. The week's largest IPO, commercial REIT Essential Properties (NYSE:EPRT), raised $455 million but traded off -3%.

Coming Up: the Busiest Week, in the Busiest Month

Getting in ahead of the July 4th holiday, another wave of deals joined the US IPO calendar for next week: 12 IPOs are expected to raise $2.5 billion in the busiest week of the year by deal count. That gears up June 2018 to be the IPO market's busiest month in three years.

New Filings Feature Big Real Estate, Marijuana and Breast Implants

Long-awaited real estate giant Cushman & Wakefield (CUSH) submitted an initial filing for an IPO that could raise over $500 million. Other notable filings: Canadian marijuana supplier Tilray (NASDAQ:TLRY) and Costa Rican breast implant maker Establishment Labs (NASDAQ:ESTA).

13 IPOs During the Week of June 18th, 2018

Issuer
Business

Deal
Size

Market Cap
at IPO

Price vs.
Midpoint

First Day
Return

Return
at 06/22

AVROBIO

$100M

$469M

12%

+64%

+62%

Developing stem cell gene therapies to cure rare lysosomal storage diseases.

Autolus Therapeutics

$150M

$676M

6%

+47%

+47%

Developing blood cancer therapies based on highly targeted CAR T cells.

i3 Verticals

$86M

$332M

8%

+41%

+33%

Provides integrated payment processing and software to SMBs.

electroCore (NASDAQ:ECOR)

$78M

$432M

0%

+32%

+32%

Commercializing a handheld nerve stimulation device for treating migraines.

Eidos Therapeutics (NASDAQ:EIDX)

$106M

$620M

6%

+36%

+29%

Developing a novel oral therapy for rare neurodegenerative diseases.

Xeris Pharmaceuticals (NASDAQ:XERS)

$86M

$326M

0%

+35%

+25%

Developing a novel formulation of an injectable hypoglycemia treatment.

Aptinyx (NASDAQ:APTX)

$102M

$561M

7%

+26%

+25%

Developing novel small molecule therapeutics for neurological disorders.

Kezar Life Sciences (NASDAQ:KZR)

$75M

$300M

0%

+18%

+19%

Developing selective immunoproteasome inhibitors to treat autoimmune diseases.

Twelve Seas Investment (TWLVU)

$180M

$225M

0%

+1%

+1%

Blank check company formed to acquire a business located in the Pan-Eurasian region.

Thunder Bridge (NASDAQ:TBRGU)

$225M

$275M

0%

+1%

+0%

Blank check company formed to acquire a FinTech business.

LF Capital Acquisition (NASDAQ:LFACU)

$135M

$169M

0%

n/a

+0%

Blank check company led by the former CEO of BNP Paribas targeting a banking or fintech business.

Essential Properties

$455M

$840M

-10%

-3%

-3%

Triple net lease REIT that manages single-tenant commercial properties.

Magenta Therapeutics (NASDAQ:MGTA)

$100M

$538M

0%

-3%

-3%

Developing novel therapies to make stem cell transplants more effective.

i3 Verticals raised $86 million by pricing at the high end. The Nashville, TN-based payment processor is led by an experienced management team, and likely benefited from strong trading in its industry group. Boosted by acquisitions, i3's growth was 25% in the most recent period, though the company may struggle to retain the high gross margins it achieved.

AVROBIO popped 63% after pricing an upsized $100 million IPO above the range, with $23 million coming from insiders. Developing gene therapies for rare diseases, AVROBIO targets a $4+ billion market based on expensive existing treatments, and its limited early trial data has been positive.

Autolus Therapeutics popped 47% on Friday after pricing an upsized $150 million IPO at the high end of the range; insiders indicated on $60 million. Investors appeared excited over the potential of Autolus' next-gen CAR T cancer therapy, a space that has seen huge success from some players (Juno, Kite) and major flops from others (Bellicum, Celyad).

Eidos Therapeutics raised $106 million after pricing at the high end of the range ($41 million from insiders), and gained 29% by week-end. Spun out of BridgeBio Pharma, the biotech recently began Phase 2 trials for its rare genetic disease target. Its trials have shown promising results, though some competitive drug candidates are further along.

Aptinyx priced an upsized $102 million IPO at the $16 high end, with insiders buying $38 million. The deal traded up 25% to $20. Aptinyx's lead candidate targets chronic central nervous system and brain disorders, and it believes its discovery platform can be used to target various other indications. However, it operates in highly competitive markets with drugs that are prone to failure (e.g. Parkinson's indication).

Kezar Life Sciences priced a slightly upsized offering, raising $75 million at the $15 midpoint, before trading up 19%. Existing investors had indicated on $30 million of the IPO. The autoimmune disease biotech company is developing preclinical assets of Onyx Pharmaceuticals. Its lead candidates is enrolling in a Phase 1b/2 trial for lupus and lupus nephritis.

Magenta Therapeutics was the week's only biotech to not raise more than anticipated; pricing its $100 million IPO at the midpoint (40% bought by insiders). The lowest-performer of the week, Magenta fell 3%. Backed by Third Rock and Atlas, Magenta is targeting multiple ways of improving bone marrow (stem cell) transplant, but the early-stage biotech faces competition from specialty players at step.

Xeris Pharmaceuticals upsized its IPO to raise $86 million at the $15 midpoint, with 37% bought by insiders. It ended the week with a 25% gain. The company is close to launching its Glucagon Rescue Pen, which makes it far easier for diabetics to save themselves in the case of extreme hypoglycemia. Its product could quickly gain share, though the market is currently small.

electroCore priced an upsized offering at the $15 midpoint, raising $75 million with insiders indicating on $20 million. The deal climbed 22% on Friday. Backed by Merck, electroCore is targeting a market of more than $1 billion with its migraine-treating device. However, it has seen low traction in Europe, and faces competition from new entrants like Amgen.

Essential Properties Realty Trust priced its IPO at the low end of the range, raising $455 million, and traded down 3% for the week. The triple-net commercial REIT has a track record of successful acquisitions and is run by an experienced management team from Spirit Realty, though its exposure to vulnerable mid-market retail could have turned off investors.

IPO Market Snapshot

The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index is up 9.2% year-to-date, while the S&P 500 is up 3.8%. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Spotify (NYSE:SPOT) and SNAP (NYSE:SNAP). The Renaissance International IPO Index is down -3.4% year-to-date, while the ACWX is down -3.2%. Renaissance Capital's International IPO ETF (NYSE: IPOS) tracks the index, and top ETF holdings include Siemens Healthineers and Delivery Hero.