The IPO market is setting up for continued investor interest in the biotech sector. Two high profile genomics companies, Complete Genomics and Pacific Biosciences, have filed S-1 Registration Statements with plans to go public in the fourth quarter around the time when market seasonality becomes more bullish. Biotech has been a strong sector in a choppy 2010 market with the NYSE Arca Biotech Index up 15.3% YTD. Selected molecular diagnostics stocks have fared well YTD with GenProbe (GPRO) up 12%, Illumina (ILMN) up 50% , and Sequenom (SQNM) up 44% . Recent data from a Piper Jaffray Report in April quantifies the molecular diagnostic market at $4.1B and growing at 12%. Piper sees long term growth coming from genetic testing with pharmacogenomic testing for cancer and sequencing for genetic conditions. Piper believes that lower sequencing costs down below $5000 will enable the convergence into molecular diagnostics.
Complete Genomics (GNOM) filed on 7/30 for an $86M IPO with UBS and Jeffries and Co. as underwriters. The Company was founded in 2005, has 159 employees and has a proprietary DNA sequencing platform with integrated software and bioinformatics providing services for genomic based research.(see Raygent.com Profile Feb 15 (http://raygent.com/?p=189). Applications for the complete genome sequencing services are cancer research,Mendelian Disease Research, Rare Variant Disease Research, and clinical trial optimization. The Company has raised $95.4M since inception through six VC’s and 5% shareholders : Orbimed Advisors,Essex Woodlands Health Ventures,Prospect Venture Partners III,OVP Venture Partners,Enterprise Partners and Highland Capital Management. The Company has 30 past and current customers for its services including the National Cancer Institute (NCI). Accumulated deficit since inception was $89.6M and revenue for 2010 was $336k with a loss of $14.3M as of 3/31/10. Cash position was $2.4M.
Pacific Biosciences (PACB) filed on 8/16 for a $200M IPO with JPMorgan and Deutsche Bank as underwriters. The Company has developed a third generation single molecule, real time sequencing platform called SMRT that enables real time analysis of biomolecules with single molecule resolution. The Company states SMRT the technology provides long readlengths of DNA, flexibility in experimental design,ease of use and fast time to result that enables new types of biological research. According to the Prospectus the innovations of SMRT are: a cell with a 75,000 “ZMW” array to incorporate labeled nucleotides, phospholinked nucleotide chemistry all integrated with the PacBio RS instrument. The strategy is to dominate DNA sequencing then expand applications beginning with RNA. The Company was founded in 2000 and has 369 employees in 164k square foot facilities.
According to Scienta Advisors the market for sequencing is $1.2B in 2009 growing to $3.6B in 2014. Current revenues of Pac Bio were $1.174M primarily from government grants for the first six months of 2010 with a backlog of $15M. The loss for six months was $63M with cumulative losses of $236M since inception. Cash position was $138M and a total of $356M has been raised since inception.
Between July 2008 and July 2009 and aggregate of 27M shares were sold in Series E convertible stock at a price of $7 and proceeds of $188M. The major 5% investors in the Company are Mohr Davidow Ventures, Deerfield Partners, The Blackstone Group, Maverick Capital Ltd., Alloy Ventures, ,GenProbe Inc.(GPRO), and KPCB Holdings.
As of June 30,2010 the Company had over 75M shares outstanding including about 17.6 shares of common exercisable with options at an exercise price of $2.70.
The Use of Proceeds will be for expansion of R&D,manufacturing, admin and marketing
Renaissance Capital of Greenwich CT (www.renaissancecapital.com) data shows a pick-up of U.S. IPO filings in 2010 with 179 filings an increase of 397% over last year and 26 more than all of 2008 with more than 4 months to go.If the market co-operates we could approach filing levels of 2005-2006. In the US 86 IPO’s have been priced YTD with total proceeds of $13.1B. a 140% over last year. There were 24 technology IPO’s the most of any sector. The average IPO return from offering price was -5.4%.
The IPO market has not provided significant liquidity for venture capital over the past few years. And venture capital investments are close to an all time low this decade. As we hear about the trillions of dollars on the sidelines waiting for the next opportunity, we can get some fresh air with a little IPO window in biotech.It is about time money flowed out of derivatives,mortgage vehicles and macro trades and into technology and companies that can grow over the long term. A few successful IPO’s could lift the biotech sector overall.
see also from May 2009: