Led by the largest biotech IPO since June 2015, six companies raised $827 million this past week. Biotech Denali Therapeutics raised $250 million, making it the largest biotech IPO of year by both deal size and market cap. The week also included pricings from a cancer biotech, a medical diagnostics company, a California bank, a payday lender and a SPAC. No companies priced above the midpoint.
The 2017 IPO market sits at 156 pricings, and we expect to see about four more by year-end to close out at an even 160 (52% more than in 2016). As deal flow slows over the next few weeks, we also expect filing activity to stagnate; it should pick up again by the end of December as companies prepare for January 2018 IPOs.
| 6 IPOs During the Week of December 4th, 2017 | |||||
| Issuer Business |
Deal Size ($mm) |
Market Cap at IPO ($mm) |
Price vs. midpoint |
First day return |
Return at 12/8 |
| Quanterix (QTRX) | $64 | $339 | 0% | +17% | +21% |
| Makes next-generation protein detection tests for clinical research. |
|||||
| Denali Therapeutics (DNLI) | $250 | $1,679 | 0% | +19% | +19% |
| An early-stage biotech developing novel therapies for neurodegenerative diseases. |
|||||
| Luther Burbank (LBC) | $131 | $597 | -7% | +9% | +9% |
| California commercial thrift focused on single and multifamily residential loans. | |||||
| CURO Group Holdings (CURO) | $93 | $666 | -7% | +1% | +1% |
| Provides payday and installment loans to non-prime consumers in North America. | |||||
| GigCapital (GIG.U) |
$125 | $168 | 0% | 0% | 0% |
| Blank check company formed by semiconductor veteran Avi Katz to acquire a TMT business. |
|||||
| Odonate Therapeutics (ODT) | $150 | $699 | -6% | -4% | -6% |
| Developing an oral chemotherapy drug for breast cancer. | |||||
3 Health Care deals with heavy insider buying
Denali Therapeutics (DNLI) raised $250 million, $100 million more than planned, and popped 19%. The early-stage biotech is developing novel treatments for Alzheimer's, Parkinson's and ALS, a white-hot space for biotech investors. The company also boasts a strong management team composed of Genentech alums. While the upsized offering provides plenty of cash, Denali will need it: Denali’s lead candidates are only just beginning Phase 1 trials. Insiders indicated on $95 million (38% of the deal) of the IPO.
Odonate Therapeutics (ODT) raised $150 million after pricing at the low end of the range and increasing its shares offered. Like Denali, Odonate was underwritten by Goldman Sachs, the bank's only two biotech IPOs of the year. Developing a novel oral chemotherapy for late-stage breast cancer, Odonate’s shares sank -4% on its first day. Insiders indicated on $41 million (27% of the deal) of the IPO.
Quanterix (QTRX) raised $64 million in an upsized offering. After pricing at the midpoint, the company traded up over 20% by Friday. If Quanterix’s “Simoa” technology for ultra-sensitive protein detection can displace a meaningful percentage of competitor Luminex’s (Nasdaq: LMNX; $900 million market cap) legacy ELISA machines, the company should see significant upside. Additionally, Quanterix’s longer-term expansion into the diagnostics and precision health screening markets, while uncertain, could unlock an estimated $30 billion market.
CURO Group (CURO) priced at the low end of the range and raised $93 million before trading up just 1%. The installment and payday lender, known for its “Speedy Cash” brand, has achieved 20%+ EBITDA margins. However, it operates in a highly competitive industry with low barriers to entry and has taken on significant debt to pay insiders.
Family-owned Luther Burbank (LBC), raised $131 million. After pricing toward the low end of the original range, the California commercial bank traded up 10% on its first day. Trading followed the positive trend for banks this year: the 11 bank IPOs are all above issue price and are up 29% on average. Luther Burbank has improved its efficiency ratio and expanded ROE in recent years; however, its loans are noticeably concentrated in southern California real estate.
GigCapital (GIG.U) raised $125 million in a downsized deal. The blank check company, whose Chairman and CEO Avi Katz previously founded and managed semiconductor company GigPeak (NYSE: GIG), traded roughly flat on its first day.
Post-IPO Earnings Update:
Four recent IPOs saw their stock prices rise after beating on earnings this week. Funko (FNKO), which had the worst first day for an IPO in 17 years, rebounded a bit (-33% total return) after beating in the 3Q17. Other recent IPOs that reported include National Vision (EYE, +51% from IPO), ForeScout Technologies (FSCT, +26%) and Evoqua Water Technologies (AQUA, +29%).
IPO Pipeline Update: one billion-dollar IPO, one micro-cap cannabis SPAC
Corporación América Airports (CAAP), which operates 51 airports worldwide including 36 in Argentina, filed for an IPO that we estimate could raise $1.0 billion, one of the largest deals in the pipeline. MTech Acquisition (MTECU), a SPAC formed to acquire a cannabis services business, filed to raise $50 million.
IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index is up 34.8% year-to-date, ahead of the S&P 500, which is up 18.4%. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Square (SQ) and Ferrari (RACE). The Renaissance International IPO Index is up 28.3% year-to-date, while the ACWX is up 22.5%. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF holdings include Covestro and Worldpay.
