Quick Take
iSpecimen (NASDAQ:ISPC) has filed to raise $20 million from the sale of its common stock in an IPO, according to an amended registration statement.
The company provides an online human biospecimen marketplace for biopharmaceutical research institutions and enterprises.
ISPC is a tiny firm and is using some of the IPO proceeds to pay down debt.
For ‘risk-on’ investors wishing to place a bet on a potential fast-grower ultra-small-cap, the IPO may be worth consideration.
Company & Technology
Lexington, Massachusetts-based iSpecimen was founded to create a marketplace connecting biopharmaceutical and academic researchers with a large selection of human biospecimens and related information.
Management is headed by founder, president and CEO Christopher Ianelli, who was previously founder and CEO of Abkine Pharmaceuticals and Managing Director at Leerink Partners, an investment bank.
Below is a brief overview video of the iSpecimen Marketplace:
Source: iSpecimen
The company’s primary offerings include:
Biospecimen procurement
Biospecimen data
Related services
iSpecimen has received at least $11 million from investors including Anna-Maria & Stephen Kellen Foundation and OBF Investments.
Customer/User Acquisition
The firm seeks relationships with biospecimen and data providers as well as customers through a direct sales model and via its online service.
In addition, the firm markets through online social media and public relations efforts.
Sales and Marketing expenses as a percentage of total revenue have dropped as revenues have increased, as the figures below indicate:
Sales & Marketing | Expenses vs. Revenue |
Period | Percentage |
2020 | 21.7% |
2019 | 32.9% |
Source: Company registration statement
The Sales and Marketing efficiency rate, defined as how many dollars of additional new revenue are generated by each dollar of Sales and Marketing spend, swung well into positive territory at 2.2x in the most recent reporting period.
Market & Competition
According to a 2018 market research report by Grand View Research, the global market for biobanks was an estimated $52 billion in 2017 and is expected to reach $74 billion by 2025.
This represents a forecast CAGR of 4.5% from 2018 to 2025.
The main drivers for this expected growth are a 'rising demand for disease-specific biosamples, especially tumor cells to accelerate precision medicine research.’
Also, the use of human biospecimens is growing in cohort studies and the market for generating biospecimens is advancing with new technologies in genetic tools, raising the demand for high quality biospecimens.
Major competitive or other industry participants include:
UCL Virtual Biobank
Specimen Central
BIOMARKAPD
Northern Ireland Virtual Tissue Archive
EuroBioBank
BBMRI - ERIC
Thermo Fisher Scientific
Lonza
Financial Performance
iSpecimen’s recent financial results can be summarized as follows:
Sharp growth topline revenue, from a low base
Increased gross profit and gross margin
Reduced operating loss and lowered negative operating margin
Lowered cash used in operations
Below are relevant financial results derived from the firm’s registration statement:
Total Revenue | ||
Period | Total Revenue | % Variance vs. Prior |
2020 | $ 8,184,106 | 90.4% |
2019 | $ 4,298,350 | |
Gross Profit (Loss) | ||
Period | Gross Profit (Loss) | % Variance vs. Prior |
2020 | $ 4,598,629 | 111.9% |
2019 | $ 2,170,450 | |
Gross Margin | ||
Period | Gross Margin | |
2020 | 56.19% | |
2019 | 50.49% | |
Operating Profit (Loss) | ||
Period | Operating Profit (Loss) | Operating Margin |
2020 | $ (2,406,380) | -29.4% |
2019 | $ (3,880,089) | -90.3% |
Net Income (Loss) | ||
Period | Net Income (Loss) | |
2020 | $ (4,652,084) | |
2019 | $ (4,727,050) | |
Cash Flow From Operations | ||
Period | Cash Flow From Operations | |
2020 | $ (288,380) | |
2019 | $ (2,679,900) | |
As of December 31, 2020, the firm had $695,909 in cash and $22.3 million in liabilities.
IPO Details
ISPC intends to sell 2.22 million shares of common stock at a proposed midpoint price of $9.00 per share for gross proceeds of approximately $20 million, not including the sale of customary underwriter options.
No existing shareholders have indicated an interest to purchase shares at the IPO price.
Assuming a successful IPO at the midpoint of the proposed price range, the company’s enterprise value at IPO would approximate $42.4 million.
Excluding effects of underwriter options and private placement shares or restricted stock, if any, the float to outstanding shares ratio will be approximately 36.42%.
Per the firm’s most recent regulatory filing, the firm plans to use the net proceeds as follows:
We intend to use the net proceeds from this offering to further develop our technology, grow our supply network, increase our marketing and sales presence, scale our operations, for working capital and general corporate purposes, and to repay the accrued and unpaid interest of the Bridge Notes...
Management’s presentation of the company roadshow is not available.
The sole listed underwriter of the IPO is ThinkEquity.
Valuation Metrics
Below is a table of the firm’s relevant capitalization and valuation metrics at IPO:
Measure [TTM] | Amount |
Market Capitalization at IPO | $54,916,425 |
Enterprise Value | $42,381,906 |
Price / Sales | 6.71 |
EV / Revenue | 5.18 |
EV / EBITDA | -17.61 |
Earnings Per Share | -$0.72 |
Total Liabilities To Equity | 1.53 |
Float To Outstanding Shares Ratio | 36.42% |
Proposed IPO Midpoint Price per Share | $9.00 |
Net Free Cash Flow | -$1,390,992 |
Free Cash Flow Yield Per Share | -2.53% |
Revenue Growth Rate | 90.40% |
Source: Company Prospectus
Commentary
ISPC wants to go public to help it pay down debt and fund its growth initiatives.
The firm’s financials show strong topline revenue growth from a small base. Cash flow from operations is approaching breakeven.
Sales and Marketing expenses as a percentage of total revenue has dropped as revenues have increased and its Sales and Marketing efficiency rate was a healthy 2.2x in the most recent reporting period.
The market opportunity for providing an online marketplace for biobank products and services is large and expected to grow at a moderate rate of growth over the coming years.
ThinkEquity is the sole underwriter and IPOs led by the firm over the last 12-month period have generated an average return of negative (7.6%) since their IPO. This is a bottom-tier performance for all major underwriters during the period.
The primary risk to the company’s outlook is the competition in the industry from incumbent competitors with greater distribution coverage with researchers.
As for valuation, management is asking IPO investors to pay an EV/Revenue of 5.18x. For an online SaaS service to the life sciences industry and that is growing revenue at 90% this multiple appears reasonable.
While the company is a tiny firm and is using some of the IPO proceeds to pay down debt, for ‘risk-on’ investors wishing to place a bet on a potential fast-grower ultra-small-cap, the IPO may be worth a look.
Expected IPO Pricing Date: Month of April, 2021.
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