Twelve deals are on the calendar to raise $1.2 billion, which would make it the year's biggest week for IPOs by proceeds and count. However, those numbers could decline if the week ahead is similar to last week, which saw seven of eight health care IPOs fail to price. The eighth (NVET) slashed its valuation and fell 10% while two yield IPOs traded up. The largest and hottest upcoming IPO arrives mid-week with health care analytics provider Inovalon, which is set to raise $500 million. The remaining eleven IPOs consist of two yield deals, four health care offerings pushed back from last week, four new health care companies and one microcap bank. Of note, we could see three genetic testing companies price this week.
Analyze this: $500 million health analytics IPO
Inovalon's (INOV) $500 million offering promises to be this week's IPO to watch. Its proposed $3.4 billion market cap would make it the largest company to go public since LendingClub (LC). By integrating vast amounts of health care data across its platform, the company improves outcomes and lowers costs for health plans as patients are treated more efficiently. Despite customer concentration and a sales dip in 2013, its massive market opportunity (>$10 billion), high client retention rate, 3-year contracts and high forecasted growth mean Inovalon should receive more attention than any other IPO this week. Close peer IMS Health (IMS) is up 26% from its April 2014 IPO.
Dividend plays: One renewable energy MLP and one mortgage REIT
Two of the three IPOs that managed to price last week included one MLP and one REIT as investors remain interested in reliable yield and, in the case of the midstream gas pipeline MLP (CPPL), future asset growth from a large parent. Sol-Wind Renewable Power LP (SLWD), an owner of solar generation assets, offers a 6.5% yield at the midpoint. Funded by fixed-rate contracts with over 15 years remaining, the company could see interest based on the performance of recent comparable IPOs (TERP, NEP, ABY). Unlike those peers, Sol-Wind will rely on third-party acquisitions for growth, as the MLP is sponsored by investment firm 40 North Management.
Backed by Wellington Management, Great Ajax (AJX) is scheduled to be the third REIT to go public in as many weeks. Unlike the previous two (HIFR, +15%; DEA, +3%), Ajax targets mortgages instead of properties - primarily re-performing and non-performing loans. While Ajax paid just $0.70 on the dollar for its acquired secured loans, the postponed offering of a mortgage REIT (SLD) in January could indicate investor caution.
Two genetic testing companies test the IPO market
The human genome has been mapped and companies like Invitae (NVTA) want consumers to learn more about themselves, for $1,500 a test. Led by the co-founder and former CEO of Genomic Health, its test covers a broad range of genetic disorders, primarily hereditary cancer. In the last twelve months (LTM), the company booked less than $1 million in sales and had a negative gross margin. Backed by Baker Brothers, BlackRock, Thomas McNerney and Wellington, insiders intend to purchase $25 million on the IPO, or 33% of the float. AutoGenomics (AMGX), which sells its genetic testing equipment to laboratories, last attempted an IPO in February 2013, and the company is now coming to market with a 33% lower market cap and triple the LTM net sales. IPO proceeds will be used to repay debt and provide necessary liquidity for the cash-strapped company ($560K at September 30, 2014).
One new biotech and one colon cancer capsule
Bellerophon (BLPH) is the week's new biotech offering. Its lead candidate uses nitric oxide to treat the orphan disease pulmonary arterial hypertension, and another drug-device aims to prevent heart failure after a severe heart attack. Its Chairman and CEO joined the company in 2014 after serving as CFO of Amgen (AMGN) for three years, and he is currently a director of June 2014 IPO Kite Pharma (KITE; +355%). Backers include New Mountain Capital, ARCH Ventures and Venrock and insiders may invest about $20 million on the IPO, or 33% of the float at the midpoint. Israel-based Check-Cap (CHEK) is the week's smallest IPO by deal size, set to raise $13 million. The Israel-based company recently added warrants to the offering and could see interest given Covidien's $860 million acquisition of close peer Given Imaging last February.
The four health care holdovers
Carbylan Therapeutics (CBYL), which is developing an injectable treatment for osteoarthritis pain in the knee, addresses an $800 million market with its alternative pain therapy, yet competitive products are widely available, it may need additional cash and insiders were not buying on the IPO (unlike 75% of biotechs). Inotek Pharmaceuticals (ITEK) boasts a $2 billion US market for its glaucoma treatment, which has shown efficacy without adverse events in clinical trials. However, the early-stage biotech is betting on its one product candidate that may struggle to come to market before that of close peer Aerie Pharmaceuticals (AERI). AltheaDx (IDGX), which sells personalized genetic tests for preventing adverse drug reactions, has grown rapidly and targets high gross margins but its industry is largely untested. Infraredx (REDX), which sells catheter systems for detecting coronary artery disease, sees close peer Avinger (AVGR) up 0.4% from its IPO in January.
Two small financial companies
Avenue Financial Holdings (AVNU), is set to raise $30 million at a $123 million market cap on Monday. Based in Nashville, Avenue could be the year's second bank after Wisconsin dairy-focused lender County Bancorp (ICBK; +21%), which is the only IPO of 2015 that currently trades above its first-day closing price. Arowana (ARWAU), an Australian blank check company focused on the energy and education industries, plans to raise $60 million on Tuesday.
| Renaissance Capital's IPO Calendar - Week of 2/9 | ||||
| Issuer Business |
Symbol Exchange |
Deal Size $mil |
Price Range Shares Filed |
Top Two Bookrunners |
| Inovalon Holdings Bowie, MD |
INOV NASDAQ |
$500 | $21 - $24 22,222,222 |
Goldman Sachs Morgan Stanley |
| Provides healthcare analytics to payors, providers and pharmas. | ||||
| Sol-Wind Renewable Power LP New York, NY |
SLWD NYSE |
$174 | $19 - $21 8,700,000 |
UBS Investment Bank Citi |
| Owns a portfolio of contracted solar generation assets. | ||||
| Great Ajax Beaverton, OR |
AJX NYSE |
$93 | $15 - $17 5,835,000 |
FBR Capital Markets Sterne Agee |
| Recently-formed REIT focusing on re-performing and non-performing mortgages. | ||||
| Invitae San Francisco, CA |
NVTA NYSE |
$75 | $13 - $15 5,350,000 |
J.P. Morgan |
| Offers a broad suite of genetic tests as a single service at a low price. | ||||
| Carbylan Therapeutics Palo Alto, CA |
CBYL NASDAQ |
$75 | $12 - $14 5,800,000 |
Leerink Partners |
| Developing a novel, injectable treatment for osteoarthritis pain in the knee. | ||||
| Inotek Pharmaceuticals Lexington, MA |
ITEK NASDAQ |
$65 | $13 - $15 4,643,000 |
Cowen & Company Piper Jaffray |
| Biotech developing a small molecule eye drop therapy to treat glaucoma. | ||||
| Bellerophon Therapeutics Hampton, NJ |
BLPH NASDAQ |
$60 | $14 - $16 4,000,000 |
Leerink Partners Cowen & Company |
| Developing drug-device combination therapies for pulmonary and cardiac diseases. | ||||
| AltheaDx San Diego, CA |
IDGX NASDAQ |
$60 | $12 - $14 4,615,000 |
Citi Jefferies |
| Offers personalized genetic diagnostic tests to predict adverse drug reactions. | ||||
| Infraredx Burlington, MA |
REDX NASDAQ |
$56 | $13 - $15 4,000,000 |
RBC Capital Markets Canaccord Genuity |
| Markets a FDA-cleared optical catheter that identifies lipid core coronary plaques. | ||||
| AutoGenomics Vista, CA |
AGMX NASDAQ |
$45 | $11 - $13 3,750,000 |
Stifel Canaccord Genuity |
| Sells a molecular diagnostics system for genetic testing in clinical laboratories. | ||||
| Avenue Financial Holdings Nashville, TN |
AVNU NASDAQ |
$30 | $11 - $13 2,500,000 |
Keefe Bruyette Woods |
| Commercial bank with five locations in the Nashville MSA and $1 billion in assets. | ||||
| Check-Cap Isfiya, Israel |
CHEK NASDAQ |
$13 | $10 - $12 1,200,000 |
Chardan Capital Markets Maxim Group |
| Developing an ingestible imaging capsule to detect colorectal cancer. | ||||
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IPO Pipeline update
There have been 60% fewer initial filings than this point last year, though the recent slowdown has been due to the preparation of year-end financial results. Last week's three new IPO filings were led by TPG-backed IASIS Healthcare (IAS), a provider of acute care and managed care services. Cloud-based adtech company MaxPoint Interactive (MXPT) became the year's first technology IPO filer. No IPOs have set terms for the week of February 16, which will see less activity because of Washington's Birthday.
IPO market snapshot
The Renaissance IPO Index, a market cap weighted basket of newly public companies that is designed to represent the US IPO market, has gained 1.1% year-to-date and traded up 3.1% in the prior week, driven by a strong earnings report from Twitter. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Zoetis (ZTS), Twitter (TWTR), Alibaba (BABA), Hilton (HLT) and Ally Financial (ALLY). To find more about purchasing shares of the ETF from your broker, visit our new IPO investing page.
