Ten deals were on the IPO calendar to price this past week, but only three made it through as seven health care IPOs delayed going public. The year's first energy IPO was also the first to raise over $1 billion as natural gas MLP Columbia Pipeline Partners priced above its range and proceeded to trade up 21% on the first day. Another dividend company produced positive returns while a pet-focused biotech was forced to slash its valuation and still traded down. Four of the seven delayed health care deals rescheduled IPOs for next week, two were postponed indefinitely and one now plans to list on the OTC Markets.
First energy IPO of 2015 was the first to raise $1 billion
Spun out of NiSource (NI), Columbia Pipeline Partners LP (CPPL) owns a 15% interest in over 15,000 miles of interstate pipelines and one of the largest natural gas storage systems in the US. While the energy sector has broadly sold off due to lower oil and gas prices, Columbia's pipelines provide necessary transportation and storage for the glut of gas coming out of the Marcellus and Utica shales. At its upwardly revised price, the company came to market with a 2.9% yield, above last year's Dominion Midstream Partners (DM; +83%), and its dividend per share may grow as it acquires additional assets and a greater interest in its operating company.
Easterly Government Properties (DEA) priced at the midpoint and traded up 3% on its debut. The company went public with a 5.5% yield, about where November 2014 REIT IPO STORE Capital (STOR; +22%) priced. Easterly benefits from having creditworthy tenants like the DEA, FBI and IRS, but its contracts limit rent raises and allow for early termination.
Pet pain biotech takes a hit; week's only health care IPO underperforms
Nexvet Biopharma (NVET) cut its valuation by 31% from the midpoint and was down 10% by Friday. The company is developing what could be the first approved biologic to treat osteoarthritis pain in dogs, but remains years from approval.
What happened to the other seven health care deals?
Health care was the most active sector in 2014 and biotechs were among the best-performing group of IPOs, opening the window for the surge of health care IPOs this year. Yet recall that half of all 2014 health care deals priced below the range, and much of the sector's returns came from post-IPO follow-through. This week there appeared to be a valuation disconnect between IPO investors and company management, as four biotechs, two devices and one medical product failed to price. Investors had many microcap deals vying for attention, but none had the profile of the prior week's Spark Therapeutics (ONCE; +95%). There may have been valid concerns over execution risk, intense competition and the companies' need for additional capital later on. Now we must stay tuned until next week to see whether the delayed deals can get done.
Four health care IPOs pushed back to next week
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 will 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, delayed its IPO again after it was originally scheduled for the week before. Close peer Avinger (AVGR) is up 0.4% from its IPO two weeks ago.
Insulin pumps and PET scans postpone
Two companies officially postponed their deals without setting a future IPO date. With a $550 million market cap, Advanced Accelerator Applications (AAAP) was the largest of the seven that failed to go public. Its imaging business generated $74 million in the trailing twelve months, but uncertainty over a nascent therapeutics division may have caused investors to demand a greater valuation discount than the company would accept. The week's only medical products company, Asante Solutions (PUMP), postponed its $49 million IPO. Insulin pump therapy is a large but extremely competitive market, and Asante's solution remains commercially unproven with negative gross margins, high cash burn and a product model that requires additional development.
EyeGate Pharmaceuticals (EYEG) further reduced its deal size and now plans to list on the OTC Markets instead of the NASDAQ, and we will therefore no longer track it. A small blank check company, Barington/Hilco Acquisition (BHACU), raised $40 million and began trading on Friday.
| IPO pricings (week of February 2, 2015) | |||||
| Company (Ticker) | Business | Deal Size ($mm) | IPO Price vs. Midpoint | First-Day Pop | Return as of 2/6 |
| Columbia Pipeline Partners LP (CPPL) | Gas pipelines and storage | $1,077 | 15% | 17% | 17% |
| Easterly Government Properties (DEA) | Government-focused REIT | $180 | 0% | 3% | 3% |
| Nexvet Biopharma (NVET) | Biologics for dogs and cats | $40 | -31% | -11% | -10% |
Find out why institutional investors rely on Renaissance Capital's Pre-IPO Research for these IPOs.
Follow us on Twitter (@IPOtweet) for IPO news as it happens and register for our updates on the IPO market.
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 past 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.
