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While life sciences IPOs continue to get done, it seems that most must now slash their target price to go public. The five life sciences companies that completed initial public offerings during the fourth week of July discounted their shares 26.4 percent on average from the midpoint of their target range to get their deals done. That compared to a 14.2 percent discount on average for the 56 life sciences companies that went public during the first half of 2012. Cancer immunotherapy biotech Immune Design failed to capture the investor enthusiasm that propelled interest in the June IPO of Kite Pharma. Immune Design raised $60 million in a bumped up offering of 5 million shares at $12 a share, the low end of its target range of $12 to $14. The biotech has several experimental therapeutic vaccines in early-stage testing for sold tumors, plus a pipeline of infectious and allergy vaccine compounds.
Pfenex raised $50 million through the sale of 8.3 million shares at $6 a share. The biotech, which is developing a biosimilar of Roche’s eye disease drug Lucentis, slashed its target price by more than 50 percent and raised the number of shares offered by 66 percent to get its deal done. Pfenex had originally planned to sell 5 million shares at $12 to $14 a share, but amended its offering to sell 8.1 million shares at $8 a share. It’s biosimilar to treat wet age-related macular degeneration is in mid-stage testing with late stage testing expected to begin in mid-2015.
Ocular Therapeutix raised $65 million through the sale of 5 million shares at $13 a share, below the target range of $14 to $16 it had hoped to get. Ocular’s proprietary drug delivery treatment for the pain and inflammation associated with cataract surgery is in late-stage testing.
Ireland-based Innocoll raised $58.5 million through the sale of 6.5 million American Depository Shares at $9 per share, 35.7 percent below its target range of $13 to $15. The biotech, which makes collagen-based pain and wound care products, plans to begin late-stage testing of a candidate to treat postoperative pain and another product to treat diabetic foot infections.
Medical device maker Intersect ENT raised $55 million through the sale of 5 million shares at $11 a share. The company priced its IPO at a 21.4 percent discount to the midpoint of its target range of $11 to $13. Intersect sells implants to treat chronic sinusitis. It had revenues of $7.5 million in the first quarter of 2014 and a $4.1 million operating loss.
Of these five companies, only medical device maker Intersect ENT ended the week up 16.8 percent as investors showed little interest in the four newly public drug developers: Pfenex, Immune Design, Ocular Therapeutics, and Innocoll. Three of these companies ended the week flat, while Pfenex was down 11.7 percent in its first day of trading.
The 10 life sciences IPOs on U.S. exchanges so far in July have raised just above $500 million, or about $50 million per IPO. That compares to an average $65.7 million per IPO for the 56 companies that completed initial public offerings during the first half of 2014, raising a total of $4.4 billion.
Overall, the biotech sector has suffered from worry over the impact of a pushback on rising drug prices and concern that the sector is overvalued. Many generalist investors, recently wildly enthusiastic about the quick returns to be made in biotech, have abandoned the sector over these concerns. Biotech specialists, traditionally supporters of life sciences IPOs, remain committed to new issues but at valuations they think are reasonable.
Still, the IPO calendar remains crowded. More than 30 companies are still in the IPO queue, with 14 having announced terms and conducting roadshows. It is likely that some may decide to postpone or withdraw their IPO offerings until conditions improve, while many will amend their offerings to reflect the current realities of the market, and go public.
July 27, 2014
http://www.burrillreport.com/article-five_life_sciences_companies_price_ipos_below_target_midpoint.html
