The IPO market came back full force this week following the July 4th pause. Nine deals raised a combined $931 million, averaging a gain of 29%.
Five biotechs went public, including top performer Allakos, which finished the week up 95%. Tilray grabbed headlines as the first marijuana seller to IPO in the US, and excitement in the space drove a 75% gain. High-growth breast implant maker Establishment Labs turned heads with a 47% gain. Two small regional banks also completed offerings. Eight of the nine IPOs finished positive; the sole exception was Constellation Pharmaceuticals, which plummeted 23%.
| 9 IPOs During the Week of July 16th, 2018 | |||||
|---|---|---|---|---|---|
| Issuer Business |
Deal Size |
Market Cap at IPO |
Price vs. Midpoint |
First Day Return |
Return at 07/20 |
| Allakos (ALLK) | $128M | $853M | 13% | +74% | +95% |
| Developing antibodies for allergic, inflammatory and proliferative diseases. | |||||
| Tilray (TLRY) | $153M | $1,637M | 13% | +32% | +75% |
| Canadian vertically integrated supplier of medical and recreational cannabis. | |||||
| Establishment Labs (ESTA) | $67M | $373M | 13% | +38% | +47% |
| Fast-growing provider of silicone breast implants outside the US. | |||||
| Crinetics Pharmaceuticals (CRNX) | $102M | $421M | 6% | +44% | +35% |
| Clinical-stage biotech developing oral therapies for rare endocrine diseases. | |||||
| Rubius Therapeutics (RUBY) | $241M | $1,994M | 10% | +5% | +15% |
| Preclinical biotech developing novel therapies based on red blood cells. | |||||
| Coastal Financial (CCB) | $41M | $174M | 4% | +13% | +9% |
| Community bank in Washington state. | |||||
| Replimune Group (REPL) | $101M | $500M | 0% | +1% | +1% |
| Developing oncolytic immunotherapies to fight solid tumors. | |||||
| First Western Financial (MYFW) | $38M | $148M | -5% | +4% | +1% |
| Denver, CO-based bank and wealth manager for high net worth individuals. | |||||
| Constellation Pharma (CNST) | $60M | $410M | 0% | -23% | -21% |
| Developing epigenetic cancer therapies that modulate abnormal genes. | |||||
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Tilray (TLRY) popped 32% on its first day, and then got even higher, finishing the week up 75%. The high-growth stock appears to be benefiting from group momentum and market opportunity. Like other Canadian cannabis producers, Tilray is building out massive capacity in anticipation of a potential global shift toward legalization, starting with Canada in the fall. Yet the unprofitable company is valued at over $2.8 billion, with just $23 million in LTM sales.
Establishment Labs (ESTA) priced an upsized offering above the range to raise $67 million at an IPO market cap of $373 million. The Costa Rican breast implant maker finished the week up 47%. Recent high-growth medical device IPOs (e.g. INSP) have had strong performance, as well as close competitor Sientra (SIEN). The extra IPO cash was a boon, given its very high cash burn (-32% EBITDA in LTM).
Allakos (ALLK) was the week's winner, flying up 74% on day one and finishing with a 95% gain. Backed by Alta Partners, RiverVest and Roche, Allakos is developing antibodies for rare inflammatory diseases. Its therapy could also target a wide range of applications including allergies and asthma. Early trial results have been positive, with more readouts expected in early 2019.
Crinetics Pharmaceuticals (CRNX) jumped 35% after pricing an upsized offering at the high end of the range. The rare endocrine disease biotech addresses a large market with a convenient oral therapy, and has a pipeline of other candidates.
Constellation Pharmaceuticals (CNST) dropped 23% on its debut, the year's worst first-day performance for an IPO. It downsized its offering by 25%, raising $60 million at the midpoint. Insiders upped their commitments to 64% of the deal, leaving a float of just $22 million worth of shares. Excitement over epigenetic cancer therapies allowed it to raise over $200 million privately, but numerous adverse events for it and competitors likely cooled investor interest, in addition to its early stage.
Rubius Therapeutics (RUBY) raised $241 million as the week's largest company by IPO market cap ($2.0 billion). Preclinical Rubius opened up 35%, settled to a first-day gain of just 5%, then rebounded to 15% by week-end. The Flagship-backed biotech is developing novel therapies based on "superblood" with a variety of potential applications.
Replimune Group (REPL) raised $101 million by pricing at the midpoint, and traded up 1% on Friday. The immuno-oncology biotech has an experienced management team, but it is still early stage with many competitors on the field.
Coastal Financial (CCB) raised $41 million in a slightly upsized offering just above the midpoint, giving it a $174 million market cap at IPO. Headquartered in Everett, WA, the community bank showed solid loan growth, with an improving efficiency ratio (68% in MRQ) and ROE (11%).
First Western Financial (MYFW) priced at the low end to raise $38 million at a $148 million market cap. The Denver bank and wealth manager finished the week up 1%. Earnings are currently hampered by a high efficiency ratio and low return metrics.
AFG Global (AFGL) had been looking to kickstart the IPO market's energy sector, but postponed its $300 million offering. Backed by Carlyle, the oil and gas OEM's customer concentration and 2017 bankruptcy may have turned off investors.
IPO Pipeline Update
| 7 Filings During the Week of July 16th, 2018 | |||
|---|---|---|---|
| Issuer Business |
Deal Size |
Sector | Lead Underwriter |
| Megalith Financial Acq. (MFACU) | $150M | SPAC | Chardan |
| Blank check company formed to acquire a financial services business. | |||
| Tenzing Acquisition (TZACU) | $50M | SPAC | Maxim |
| Blank check company formed to acquire a business in India. | |||
| Aridis Pharmaceuticals (ARDS) | $35M | Health Care | Cantor Fitz. |
| Developing immunotherapies targeting pathogens associated with pneumonia. | |||
| Pacific City Financial (PCB) | $50M | Financials | KBW |
| California commercial bank primarily serving Korean-American communities. | |||
| Pintec Technology (PT) | $70M | Financials | Goldman (Asia) |
| Operates an online platform that enables merchants to offer financing in China. | |||
| Ra Medical (RMED) | $86M | Health Care | Piper Jaffray |
| Develops excimer lasers used to treat dermatologic and cardiovascular diseases. | |||
| Remora Royalties (RRI) | $100M | Energy | RBC |
| Owns and acquires overriding royalty, mineral and royalty interests in oil and natural gas properties. | |||
IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index is up 9.6% year-to-date, while the S&P 500 is up 6.0%. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Spotify (SPOT) and SNAP (SNAP). The Renaissance International IPO Index is up 5.5% year-to-date, while the ACWX is up 5.4%. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF holdings include Delivery Hero and Siemens Healthineers.
