US IPO Week Ahead: Health care deals lead 11-IPO week

Helped by a strong market, the steady stream of June IPOs should continue in the week ahead with eleven companies scheduled to raise a combined $1.4 billion. SMB payments processor i3 Verticals and triple net lease REIT Essential Properties headline the week, with eight health care deals and a blank check company also expected to price IPOs.

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i3 Verticals (IIIV), which aims to raise $80 million at a $307 million market value, provides electronic payment processing and software to smaller businesses that are often overlooked by its larger competitors. While the company relies on a capital-intensive M&A strategy to grow, it has successfully raised margins from its acquisitions and its sticky integrated payments solutions segment makes up over 40% of payment volume. The company is also led by an experienced management team: the CEO previously founded and sold both iPayment and PMT Services, two successful payments companies.

Essential Properties Realty Trust (EPRT), a REIT focused on triple net leases to middle-market, service-based businesses, aims to raise $504 million at a market value of $917 million. The company has grown rapidly through acquisitions, doubling revenue in the 1Q18, and boasts a management team with experience from Spirit Realty (NYSE: SRC). That said, its middle market tenants are particularly vulnerable to slowdowns in consumer spending. Concurrent with the IPO, its PE backer Eldridge plans to invest $125 million.

The health care wave continues with 8 deals
Aptinix (APTX), which is developing next generation treatments for chronic central nervous system and brain disorders, aims to raise $80 million at a market value of $509 million. Its lead candidate is currently in Phase 2 trials for diabetic peripheral neuropathy and fibromyalgia with topline results expected in the 1H19; its second candidate is in Phase 1 trials for the underlying causes of PTSD. While trials have shown high tolerability to date, the company will have to capture share in the highly competitive chronic pain market, which includes large incumbents such as Cymbalta and Lyrica. Insiders intend to purchase $30 million of the IPO (38% of the deal).

electroCore (ECOR) is commercializing a treatment for migraines that utilizes a handheld device to stimulate nerves, and aims to raise $65 million at a $419 million market value. Its gammaCore device was recently approved by the FDA and produces an effect similar to commonly prescribed SSRIs and triptan medications. While the company is targeting a billion-dollar market and the deal will be supported by $20 million of insider buying (31% of the IPO), the device has seen low adoption rates in the UK and Germany since 2012 and will face competition from large pharmas.

Eidos Therapeutics (EIDX) is targeting $100 million at a $583 million valuation. Being spun out of biotech holding company BridgeBio Pharma, this company is developing an oral therapy for transthyretin amyloidosis, a rare genetic disease. After promising Phase 1 results in healthy volunteers, Eidos initiated a Phase 2 trial in April 2018, with data expected by the end of the year. The IPO will be supported by $50 million of insider buying (50% of the deal).

AVROBIO (AVRO), which is developing stem cell gene therapies to cure rare diseases, aims to raise $75 million at a valuation of $405 million. The company’s lead candidate for the treatment of Fabry disease is in Phase 1 clinical trials for safety and toxicity; it expects to initiate Phase 2 trials in mid-2018. Insiders are buying $38 million of the IPO (50% of the deal).

Kezar Life Sciences (KZR) is developing proteasome inhibitors for autoimmune diseases, and is targeting $70 million at a valuation of $295 million. The company is currently enrolling a Phase 1b/2 trial for lupus patients for its lead candidate, with topline results expected in the 1H19. The company also plans to initiate Phase 1b and Phase 2 trials in four additional indications in 2019. Insiders indicated on $30 million (43% of the deal) on the IPO.

Magenta Therapeutics (MGTA), which is developing a pipeline of novel therapies aimed at improving stem cell transplants, targets $100 million at a market value of $538 million. The company’s lead candidate, MGTA-456, was in-licensed from Novartis and aims to increase the number of stem cells in each cord blood unit. Magenta initiated a Phase 2 study of MGTA-456 in patients with inherited metabolic diseases and intends to report initial data in the 2H18. Insiders intend to purchase $40 million on the IPO (40% of the deal).

Xeris Pharmaceuticals (XERS) is developing an injectable hypoglycemia treatment and aims to raise $75 million at market value of $315 million. The company’s lead product candidate is the Glucagon Rescue Pen, which recently completed Phase 3 clinical trials; Xeris expects to submit an NDA to the FDA in the 3Q18. Insiders indicated on $30 million (40% of the deal).

Autolus Therapeutics (AUTL) is targeting $125 million at a valuation of $620 million. The CAR-T cell cancer therapy company expects to complete proof-of-concept Phase 1/2 clinical trials for hematological cancers by early 2019.

Blank check company LF Capital Acquisition (LFACU) is backed by Level Field Capital and targets $135 million at a valuation of $169 million. The SPAC aims to acquire a business in the commercial banking or fintech industry.

IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index is up 11.9% year-to-date, while the S&P 500 is up 4.0%. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Spotify (SPOT) and US Foods (USFD). The Renaissance International IPO Index is down -2.4% year-to-date, while the ACWX is down -1.4%. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF holdings include Orsted (DONG Energy) and ASR Nederland.