The largest biotech ever to go public is on the calendar for this week, targeting a $2.2 billion valuation at IPO.
Ten IPOs and two blank check companies plan to raise over $2 billion. Half are set to have a market cap of less than $200 million, and for these our IPO poll takers have less than great expectations.
A killer cure for cancer: NantKwest could be largest biotech to go public
NantKwest (NK) has the makings of a hot IPO. Larger biotechs have typically outperformed their smaller counterparts, and this company will have the largest market cap at IPO out of any biotech in at least 20 years. Owned and led by billionaire physician Patrick Soon-Shiong, NantKwest is in the early stages of developing "off-the-shelf" immunotherapies for cancer. Soon-Shiong and Franklin Templeton will invest up to $55 million, reducing the company's already-low float to about 4% of the fully-diluted market cap. Celgene (CELG) is purchasing $17 million worth of shares in a private placement. Most immunotherapy biotechs have focused on T-cells instead of natural killer cells, meaning certain health care investors will likely buy NantKwest to diversify a portfolio of cancer immunotherapies. Even with over $280 million in post-IPO cash, NantKwest will require additional funding as it targets 26 indications, including various blood cancers and solid tumors. It even claims its technology may be used to treat infectious diseases like Ebola as well as inflammatory diseases. Despite several positive signs for near-term trading, investors must grapple with supporting a multibillion-dollar valuation for a company with just one IND submitted to the FDA.
Turn on the vTv: Large Alzheimer's biotech also backed by billionaire
vTv Therapeutics (VTVT) has met its primary Phase 2 endpoints for Alzheimer's disease, unlike other therapies in development. Formerly TransTech Pharma, it has also lost over $550 million since it was bought by billionaire Ron Perelman's investment firm MacAndrews & Forbes in the 1980's. Its proposed $525 million market cap would make it larger than 85% of biotechs since 2013 at the time of IPO, and Perelman's company is investing $25 million on the offering. In June, Alzheimer's biotech Axovant (AXON) priced an upsized IPO above the midpoint at a $1.5 billion valuation and gained 99% on its first day, but the company has since fallen close to its offer price.
Shine on: Year's 2nd largest IPO from a wind and solar power spinoff
TerraForm Global (GLBL) is on the calendar to raise over $1.1 billion in what would be the year's second largest IPO. Spun out of SunEdison (NYSE: SUNE), this "yieldco" will own nearly $4 billion worth of wind, solar and hydro-electric assets in emerging markets like Brazil, India, Honduras and China. It targets an annual yield of 5.5%, The company's fixed-rate contracts with state-owned utilities could generate cash for almost 20 years, and TerraForm has a large pipeline of assets for dividend growth. However, the renewable energy space has sold off from its earlier highs: June IPO 8point3 Energy Partners LP (CAFD) is down 22% from its offer price and July 2014 IPO TerraForm Power (TERP) has traded off 21% in the past month.
Two more yield IPOs: ships and apartments
Poseidon Containers (PCON) is set to be the week's second-largest IPO with a deal size of $231 million. It targets a market cap of $517 million with an enterprise value of $1.1 billion. It has over $600 million in post-IPO debt and plans to offer a dividend beginning in November. All three of the year's transportation IPOs have traded down on the first day. Riverbanc Multifamily Investors (RMI) is a recently-formed REIT managed by CEO Kevin Donlon's RiverBanc LLC and backed by Ellington and New York Mortgage Trust (Nasdaq: NYMT). It will own debt and equity interests in apartment units primarily located in Texas and the Southeastern US.
We'll do it live: Production services firm to raise $208 million
NEP Group (NEPG) is a top global player in a $10 billion industry, though the company is experiencing little growth (<1% organic) and pressured margins. LBO'd by Crestview Partners in 2012, the outsourced provider of entertainment production equipment and personnel must balance its high floating-rate debt with an acquisition-based growth strategy.
Xcel Brands (XELB), which trades on the OTCQX, plans to raise $16 million at a valuation of about $200 million. The profitable company licenses the Isaac Mizrahi and Judith Ripka brands, as well as sub-brands of Halston and Liz Claiborne. It has made acquisitions in exchange for equity, most recently Chris Burch's bankrupt fashion brand C Wonder. Close peer Cherokee (NASDAQ: CHKE) is up about 40% year-to-date.
Two small biotechs: Reformulations of eye drops and Parkinson's drugs
EyeGate Pharmaceuticals (EYEG) had attempted list on the Nasdaq in September ($101 million market cap), November ($53 million) and February ($43 million), at which point it instead raised about $4 million (75% from insiders) and began trading on the OTCQB. The late-stage combination drug/delivery biotech has seen its thinly-traded stock soar as it signed a license agreement with Valeant (NYSE: VRX), began dosing its first patient for macular edema and received a patent on its reformulated version of a commonly-used eye drop. Intec Pharma (NTEC), which trades on the Tel Aviv Stock Exchange, is the year's third foreign-listed biotech developing a reformulation of an existing therapy for Parkinson's disease, after June IPOs Biotie (BITI; +24%) and Cynapsus (CYNA; +19%).
| Renaissance Capital's IPO Calendar - Week of July 27, 2015 | ||||
| Issuer Business |
Symbol Exchange |
Deal Size $mil |
Price Range Shares Filed |
Top 2 bookrunners |
| TerraForm Global Bethesda, MA |
GLBL Nasdaq |
$1,131 | $19 - $21 56,570,000 |
J.P. Morgan Barclays |
| Yieldco formed by SunEdison to own wind and solar power assets in emerging markets. | ||||
| Poseidon Containers Holdings Kifissia, Greece |
PCON NYSE |
$231 | $14 - $16 15,380,000 |
Morgan Stanley Deutsche Bank |
| Containership operator with an initial fleet of 19 vessels. | ||||
| NEP Group Pittsburgh, PA |
NEPG NYSE |
$208 | $15 - $17 13,000,000 |
Barclays Morgan Stanley |
| Largest global provider of outsourced live and broadcast production solutions. | ||||
| NantKwest Cardiff-by-the-Sea, CA |
NK Nasdaq |
$151 | $20 - $23 7,000,000 |
BofA Merrill Lynch Citi |
| Developing cancer immunotherapies based on natural killer cells. | ||||
| vTv Therapeutics High Point, NC |
VTVT Nasdaq |
$125 | $15 - $17 7,812,500 |
Piper Jaffray Stifel |
| Biotech developing treatments for Alzheimer's disease and type 2 diabetes. | ||||
| RiverBanc Multifamily Investors Charlotte, NC |
RMI Nasdaq |
$74 | $19 - $20 3,800,000 |
Baird Keefe Bruyette Woods |
| Residential REIT formed to own debt and equity interests in apartment communities. | ||||
| Intec Pharma Jerusalem, Israel |
NTEC Nasdaq |
$38 | $8.36 4,500,000 |
Maxim Group Roth Capital |
| Developing an improved delivery method of carbidopa/levodopa for Parkinson's disease. | ||||
| Aqua Metals Oakland, CA |
AQMS Nasdaq |
$30 | $5 6,000,000 |
National Securities |
| Developing an environmentally safe method of recycling used lead batteries. | ||||
| Xcel Brands New York, NY |
XELB Nasdaq |
$16 | $10 - $11 1,500,000 |
Wunderlich Securities |
| Licenses a portfolio of acquired apparel brands. | ||||
| EyeGate Pharmaceuticals Waltham, MA |
EYEG Nasdaq |
$13 | $15 869,566 |
Aegis Capital Chardan Capital |
| Late-stage biotech developing a treatment for eye inflammation. | ||||
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IPO pipeline update: Ferrari, First Data and Vizio join the pipeline
Three companies submitted initial filings last week. Each has over $1 billion in annual sales, cueing them up for IPOs in mid-September at the earliest. First Data (FDC.RC) had been one of the largest LBOs from the 2005-2007 buyout boom, and now it could be the largest IPO of 2015 with an estimated deal size of $5 billion. Ferrari (FRRI.RC), one of the world's most recognizable brands, filed for an IPO that could raise $1 billion. TV and soundbar maker Vizio (VZIO) also filed. Filings from emerging growth companies should pick up in mid-August in preparation for post-Labor Day offerings.
IPO market snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index has traded up about 7% year-to-date, compared to 1% for the S&P 500. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Alibaba (BABA), Twitter (TWTR) and Hilton Worldwide (HLT). After giving up all of its returns last week, the Renaissance International IPO Index is back up to a 6% gain year-to-date, compared to 1% for the ACWX. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF Holdings include Altice and Recruit Holdings. To find out if this is the best ETF for you, visit our IPO Investing page.
