Seven initial public offerings are expected to raise $1.7 billion in the upcoming week. Four IPOs are biotechs, including Forward Pharma, which could be the year's largest (and 60th), and three others in early stages of development. Consolidated fiber optic network Zayo Group is expected raise $650 million to be the week's largest deal. We should also see the IPOs of midstream energy assets carved out of Dominion Resources and a Midwestern bank spun out of National Australia Bank.
34 IPOs have priced since the beginning of September and 56% trade below the offer price. Continued poor performance could impact IPO issuance, though last week the pipeline saw eight companies file terms and seven submit initial filings.
A bundle of fiber optics
Zayo Group (ZAYO) is scheduled to be the week's largest IPO with an expected deal size of $650 million (62% insider). Zayo offers long-term leases on infrastructure assets (dark fiber, mobile fiber-to-tower, colocation facilities) and short term contracts for "lit services," or bandwidth. It has generated most of its growth through acquisitions, including AboveNet in 2012 for $2.2 billion and 360networks in 2011 for $318 million. The company likely needs its strong EBITDA margins (58% in the LTM) and visible cash flow to convince investors that it can delever. Zayo, the year's only pure telecom-related IPO, is backed by GTCR, Oak Investment Partners, M/C Partners, Charlesbank Capital and Battery Ventures.
Mid-size Midwestern banking spinoff
Acquired by National Australia Bank (NAB) in 2008 for $877 million, Great Western Bancorp's (GWB) IPO is expected to raise $360 for its parent (offering the entire float) at a $1.3 billion market cap ($1.8 billion enterprise value). The company boasts an efficiency ratio of 51%, well below the group average, but could face pushback based on the performance of the year's ten US-based regional banks (4% average). Midwestern bank peer Talmer (TLMR) has traded up about 5% since its February IPO. Great Western is expected to be the second-largest US bank IPO so far this year, behind Citizen's Financial (CFG).
Fourth week in a row with a midstream energy MLP
Dominion Midstream Partners LP (DM) is the latest in a series of IPOs from oil and gas MLPs with midstream assets. The $350 million deal will be used to purchase interest in the Cove Point offshore LNG terminal near Lusby, Maryland, from parent Dominion Resources (D). The company has secured long-term contracts from blue-chip customers and comes with the potential to grow assets rapidly, yet recent headwinds in the energy sector could make it an uphill battle for this midstream MLP.
Year's largest biotech puts its best foot forward
Forward Pharma (FWP) is scheduled to be the year's largest biotech, with a proposed deal size of $200 million and diluted market cap of $944 million. While large biotech IPOs have generally outperformed the smaller deals, Forward is a unique story. The company will soon enter Phase 3 trials for its multiple sclerosis treatment, but an upcoming courtroom trial may prove to be just as important. The forward-thinking company claims that competitor Biogen Idec's multi-billion dollar Tecfidera treatment for MS (launched in April 2013) infringes on Forward's patents. The Copenhagen, Denmark-based company's primary shareholders are founder-controlled Nordic Biotech and Australian venture firm BioScience Managers. Bridge lender BVF Partners LP has indicated plans to pruchase $25 million worth of ADSs on the offering.
Three early-stage biotechs
Three biotechs are expected to raise $75 million or less, each in early stages of clinical development. Moreso than Forward Pharma, the performance of these IPOs could serve as a bellwether for biotechs in the fourth quarter.
Atara Biotherapeutics (ATRA), set to raise $75 million, is in Phase 1 trials for a drug that targets muscle loss in patients on kidney dialysis. It originally planned to go public in mid July but postponed due to the release of clinical results. The results neither derailed the IPO nor boosted its valuation, though the IPO market is arguably more challenging now than in July. The last four biotechs have had negative first-day returns, and the eight that have gone public since September 1 average a -12% return.
Virobay (VBAY) is expected to price a $50 million IPO. Backed by TPG, Sutter Hill, Alta Partners and AbbVie, the company has completed Phase 1 trials for its enzyme inhibiting platform targeting neuropathic pain, Crohn's disease and psoriasis. Insiders plan to purchase 22% of the offering.
Xenon Pharmaceuticals (XENE), which could price a $44 million IPO, licenses its gene therapy discovery platform to a number of major pharmaceutical companies, including Teva (TEVA; Phase 2 trials for osteoarthritis; investing $10 million on the offering), Genentech (Phase 1 trials for pain; investing $5 million in a private placement) and Merck (MRK; preclinical trials for cardiovascular disease). Its platform was used to develop uniQure's (QURE, -42% from February IPO) Glybera treatment, the first gene therapy approved in the EU, for which it receives mid single-digit royalties. Backers include Medpace, InterWest Partners and Fidelity.
Viking Therapeutics (VKTX) originally planned to raise $55 million during the week of September 15 and may price its IPO depending on market conditions.
| IPOs set to price during the week of Oct 13, 2014 | |||
| Company (Ticker) | Business | Lead underwriters |
Deal Size ($mm) |
| Great Western Bancorp (GWB) | Midwestern bank spun out of NAB |
Deutsche BofA ML |
$360 |
| Dominion Midstream Partners LP (DM) | Dominion Resources' offshore LNG terminal | Barclays Citi |
$350 |
| Forward Pharma (FWP) |
Biotech: Treatment for MS | Leerink Jefferies |
$200 |
| Atara Biotherapeutics (ATRA) | Biotech: Muscle loss from renal disease | Goldman Citi |
$75 |
| Virobay (VBAY) | Biotech: Pain and autoimmune diseases | Piper Jaffray JMP |
$50 |
| Zayo Group (ZAYO) | Fiber optic bandwidth infrastructure | M. Stanley Barclays |
$650 |
| Xenon Pharmaceuticals (XENE) |
Biotech: Licensed gene therapy platform | Jefferies Wells Fargo |
$44 |
The following IPOs are expected to price this week:
Atara Biotherapeutics (ATRA), an early-stage biotech targeting muscle loss in patients with end-stage renal disease, plans to raise $75 million by offering 5.0 million shares at a price range of $14 to $16. At the midpoint of the proposed range, it would command a market value of $305 million. Founded in 2012, the Brisbane, CA-based company plans to list on the NASDAQ under the symbol ATRA. Goldman Sachs and Citi are the joint bookrunners on the deal. Postponed July 2014 IPO due to pending release of preclinical data and refiled under the same terms in October.
Dominion Midstream Partners LP (DM), an MLP carved out of Dominion Resources to own an offshore LNG terminal near Lusby, Maryland, plans to raise $350 million by offering 17.5 million units at a price range of $19 to $21. At the midpoint of the proposed range, it would command a market value of $1.3 billion. Dominion Midstream Partners LP, which was formed in 2014, booked $254 million in historical sales over the last 12 months. The Richmond, VA-based company plans to list on the NYSE under the symbol DM. Barclays, Citi, J.P. Morgan and BofA Merrill Lynch are the joint bookrunners on the deal.
Forward Pharma (FWP), a biotech developing an alternative to and challenging the IP of Biogen Idec’s Tecfidera for MS, plans to raise $200 million by offering 9.5 million ADSs at a price range of $20 to $22. At the midpoint of the proposed range, Forward Pharma would command a market value of $945 million. Founded in 2005, the Copenhagen, Denmark-based company plans to list on the NASDAQ under the symbol FWP. Leerink Partners, Jefferies and RBC Capital Markets are the joint bookrunners on the deal.
Great Western Bancorp (GWB), an agribusiness-focused Midwestern bank with 162 branches and $9 billion in assets, plans to raise $360 million by offering 16.0 million shares at a price range of $21 to $24. At the midpoint of the proposed range, it would command a market value of $1.3 billion. Great Western Bancorp, which was founded in 1935, booked $376 million in net interest and noninterest income over the last 12 months. The Sioux Falls, SD-based company plans to list on the NYSE under the symbol GWB. Deutsche Bank and BofA Merrill Lynch are the joint bookrunners on the deal.
Hydra Industries Acquisition (HDRAU), a blank check company formed by A. Lorne Weil and sponsored by Macquarie, plans to raise $100 million by offering 10.0 million units at $10. Each unit includes one share of stock and one warrant to purchase one-half of one share at a price of $5.75. Formed in 2014, the New York, NY-based company plans to list on the NASDAQ under the symbol HDRAU. UBS Investment Bank is the lead bookrunner on the deal. We do not include blank check companies in our IPO tracking statistics.
Virobay (VBAY), an early-stage biotech developing a drug platform for pain and autoimmune diseases, plans to raise $50 million by offering 3.8 million shares at a price range of $12 to $14. At the midpoint of the proposed range, it would command a market value of $180 million. Virobay, which was founded in 2006, booked $2 million in collaboration revenue over the last 12 months. The Menlo Park, CA-based company plans to list on the NASDAQ under the symbol VBAY. Piper Jaffray and JMP Securities are the joint bookrunners on the deal.
Xenon Pharmaceuticals (XENE), an early-stage biotech with a gene therapy discovery platform for rare diseases, plans to raise $44 million by offering 4.0 million shares at a price range of $10 to $12. At the midpoint of the proposed range, it would command a market value of $159 million. Xenon Pharmaceuticals, which was founded in 1996, booked $27 million in collaboration revenue over the last 12 months. The Burnaby, Canada-based company plans to list on the NASDAQ under the symbol XENE. Jefferies and Wells Fargo Securities are the joint bookrunners on the deal.
Zayo Group Holdings (ZAYO), a national provider of fiber optic bandwidth infrastructure and colocation services, plans to raise $650 million by offering 28.9 million shares at a price range of $21 to $24. At the midpoint of the proposed range, it would command a market value of $5.3 billion. Zayo Group Holdings, which was founded in 2007, booked $1.1 billion in sales over the last 12 months. The Boulder, CO-based company plans to list on the NYSE under the symbol ZAYO. Morgan Stanley, Barclays and Goldman Sachs are the joint bookrunners on the deal.
Renaissance Capital will have Pre-IPO Research available on these upcoming IPOs prior to pricing.
Last week, there were 7 IPO pricings. Diplomat Pharmacy (DPLO), which operates the fourth-largest specialty pharmacy in the US, was the week's winner, ending up 23% from its IPO price. Notably, MOL Global (MOLG) had the worst first-day drop in over 10 years as the IPO fell 35% from its offer price; investors appeared to reject its plans to be the dominant virtual payment provider in Southeast Asia.
The Renaissance US IPO Index (Ticker: IPOUSA), a market-cap weighed basket of newly public companies designed to represent the US IPO market, is down 2.7% year-to-date. Renaissance Capital's IPO ETF tracks the index, and its top holdings include Alibaba, Twitter, Zoetis, Workday and Hilton.
