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Ikaria (IKAR) IPOreport

|Includes: Ikaria (IKAR)
Nov 8wk IPO calendar

Ikaria (IKAR) $160mm IPO with a market cap of $710 at price mid-point of $16.
Scheduled for Thursday, November 11, 2010

IKAR Valuation Metrics

SUMMARY
Too much risk in an annualized P/E of 54, based on annualized September 30, 2010 nine months results. 

. IKAR posted a posted a 55% decline in profit for the nine months ended September 30, 2010 (compared to the year earlier period) to $6.5mm from $14.6mm.
. Revenue increased only 10%, and a large part of that increase was due to a price increase.
. Gross profit declined to 78% from 81%
. Operating earnings declined to $27mm from $32.7mm
. Interest rose to $14mm from $7mm
. Extinguishment and modification of debt accounted for a $3.7mm charge

BUSINESS
Biotherapeutics company focused on developing and commercializing innovative therapeutics and interventions designed to meet the significant unmet medical needs of critically ill patients

SALES INCREASE DRIVEN BY PRICE HIKES
Revenue growth
. Net sales of $219 million in the first nine months of 2010, as compared to $199 million in the first nine months of 2009, representing growth of 10%.
. Generated net sales of $274 million in 2009, as compared to $237 million in 2008, representing growth of 16%, and
Driven by price increases
. Price increase of 5% in the fourth quarter of 2008 contributed $10 million of the sales growth from 2008 to 2009
. And a price increase of 4.5% in the fourth quarter of 2009 contributed to the sales growth from the nine months ended September 30, 2009 to the comparable period in 2010
Profit decline: 55% decline in profit for the nine months ended September 30, 2010

LEVERAGED BUYOUT
. On March 28, 2007, closed a private of $280.0 million, and secured $235.0 million in financing from the previous term loan.
. With the proceeds from the private placement and the previous term loan ($515mm) and the issuance of stock, stock options and a warrant, acquired the sole membership interest of INO Therapeutics and all the outstanding equity of Ikaria Research, Inc. on March 28, 2007.

DIVIDENDS PAID
Bled the company of cash in preparation for the IPO
. On May 10, 2010 and paid to stockholders of record as of May 28, 2010 a special cash dividend of $130.0 million from a new credit facility and cash on hand.
. The terms of the new credit agreement permitted the special cash dividend described above, but otherwise restrict payment of cash dividends on our capital stock.

USE OF PROCEEDS
$142mm
•  $70.0 million to repay debt
•  $11.0 million for costs to consolidate two existing facilities to create a new corporate headquarters, including for leasehold improvements, telecommunications equipment, furniture and fixtures
•  Remainder for working capital and other general corporate purposes, including acquisition and in-licensing opportunities.

IKAR Valuation Metrics