March and Q1 2014 IPO Market Review

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April 16, 2014

The March 2014 IPO market produced 23 IPOs—since the end of 2000, only 10 months have topped the March tally. The 60 IPOs in the first quarter of 2014 reflect the fourth consecutive quarterly increase in the number of IPOs and represent the highest quarterly figure since the 63 IPOs in the fourth quarter of 2007.

Gross proceeds of $2.86 billion in March brought the total for the first quarter of 2014 to $9.53 billion—71% above the $5.58 billion raised by the 20 IPOs in the first quarter of 2013.

March produced nine IPOs by life sciences companies, bringing the year-to-date count to 31 IPOs and equal to 52% of all US IPOs. The high proportion of life sciences company IPOs is partly responsible for the decline in the median IPO offering size from $107.4 million for full year 2013 to $88.0 million in the first quarter of 2014, representing the lowest yearly figure since the $84.0 million median offering size in 2000.

The shift in the percentage of profitable IPO companies and the median annual revenue of IPO companies from 2013 to 2014 is more stark. The percentage of profitable IPO companies declined from 43% for full-year 2013 to 22% in the first quarter of 2014—a figure even below the 26% that prevailed at the height of the dot-com boom in 1999 and 2000. The median annual revenue of IPO companies fell from $89.9 million for full-year 2013 to $20.8 million in the first quarter of 2014, with life sciences IPO companies reporting annual revenue of less than $1 million.

The average IPO company in the first quarter of 2014 has enjoyed a 21% first-day gain from its offering price—equal to the average first-day gain for full-year 2013. Year-to-date, 28% of IPOs were “broken” (closing below the offering price in first-day trading), representing the highest percentage of broken IPOs since 2010. At March month-end, a similar percentage of the 2014 IPO class were trading below their offering price. The average 2014 IPO ended the month 27% above its offering price, outperforming the Dow Jones Industrial Average and Nasdaq Composite Index by a wide margin.

With 103 IPO public filings in the first three months of 2014—a quarterly total surpassed only once in the prior 10 years—deal flow in the coming months is expected to be strong as long as favorable capital market conditions prevail. Moreover, overall deal flow is masked to some extent by confidential submissions by emerging growth companies under the JOBS Act.

IPO activity in March consisted of offerings by the following companies listed in the order they came to market:

  • Aquinox Pharmaceuticals, a clinical-stage pharmaceutical company discovering and developing novel drug candidates to treat inflammation and cancer, priced an IPO upsized by 14% at the midpoint of the range and gained 9% on its first trading day.
  • Coupons.com, a leading digital promotion platform that connects great brands and retailers with consumers, priced an IPO upsized by 5% above the range and produced a first-day gain of 88%.
  • Recro Pharma, a clinical-stage specialty pharmaceutical company developing non-opioid therapeutics for the treatment of pain, initially in the post-operative setting, priced an IPO upsized by 47% below the range and ended its first day of trading up 4%.
  • Achaogen, a clinical-stage biopharmaceutical company passionately committed to the discovery, development and commercialization of novel antibacterials to treat multi-drug resistant, or MDR, gram-negative infections, priced an IPO upsized by 20% at the low end of the range and traded up 19% on its opening day.
  • Dipexium Pharmaceuticals, a late stage pharmaceutical company focused on the development and commercialization of a novel, first-in-class, broad spectrum, topical antibiotic, priced an IPO upsized by 19% at the low end of the range and gained 17% on its first day.
  • Galmed Pharmaceuticals, a clinical-stage biopharmaceutical company focused on the development and commercialization of a novel, once-daily, oral therapy for the treatment of liver diseases and cholesterol gallstones utilizing proprietary first-in-class family of synthetic fatty-acid/bile-acid conjugates, priced an IPO upsized by 21% within the range and ended its first trading day up 6% from its offering price.
  • Castlight Health, a provider of cloud-based software that enables enterprises to gain control over their rapidly escalating health care costs, priced above an upwardly revised price range and produced a first-day gain of 149%—the fourth “moonshot” of the year (an IPO that doubles in price on its opening day).
  • Paylocity Holding, a cloud-based provider of payroll and human capital management software solutions for medium-sized organizations, priced an IPO upsized by 6% above the range and gained 44% of its first trading day.
  • Akebia Therapeutics, a biopharmaceutical company focused on the development of novel proprietary therapeutics based on hypoxia inducible factor biology and the commercialization of these products for patients with kidney disease, priced an IPO upsized by 20% at the high end of the range and produced a first-day gain of 57%.
  • MediWound, a fully integrated biopharmaceutical company focused on developing, manufacturing and commercializing novel products to address unmet needs in the fields of severe burns, chronic and other hard-to-heal wounds and connective tissue disorders, priced at the low end of the range and gained 23% on its first day of trading.
  • Q2 Holdings, a leading provider of secure, cloud-based virtual banking solutions, priced at the top of the range and gained 17% in first-day trading.
  • A10 Networks, a leading provider of advanced application networking technologies, priced at the top of the range and gained 8% on its first day of trading.
  • Amber Road, provider of cloud-based global trade management solutions, priced an IPO upsized by 13% above the range and produced a first-day gain of 31%.
  • BorderFree, a market leader in international cross-border ecommerce, operating a proprietary technology and services platform to enable U.S. retailers to transact with consumers in more than 100 countries and territories worldwide, priced at the top of the range and ended its first day of trading with a 25% gain.
  • Versartis, an endocrine-focused biopharmaceutical company initially developing a novel long-acting recombinant human growth hormone, VRS-317, for growth hormone deficiency, priced an IPO that had earlier been upsized by 30% at the high end of an upwardly revised price range and jumped 49% in first-day trading.
  • King Digital Entertainment, an interactive entertainment company for the mobile world with leading games including Candy Crush Saga, Pet Rescue Saga and Farm Heroes Saga, priced at the midpoint of the range and slid 16% on its first day.
  • Nord Anglia Education, a leading international operator of premium schools, priced at the midpoint of the range and gained 13% on its first day of trading.
  • Applied Genetic Technologies, a clinical-stage biotechnology company that uses its proprietary gene therapy platform to develop products designed to transform the lives of patients with severe inherited orphan diseases in ophthalmology, priced an IPO upsized by 17% below the range and produced a first-day gain of 23%.
  • TriNet Group, a leading provider of a comprehensive human resources solution for small to medium-sized businesses, priced in the middle of the range and ended its first day of trading up 19%.
  • 2U, a leading provider of cloud-based software-as-a-service solutions that enable leading nonprofit colleges and universities to deliver high quality education to qualified students anywhere, priced at the high end of the range and gained 8% on its first day of trading.
  • Aerohive Networks, a designer and developer of a leading cloud-managed mobile networking platform that enables enterprises to deploy a mobile-centric network edge, priced at the midpoint of the range and ended its first day flat.
  • Energous, a development stage technology company developing technology that can enable wireless charging or powering of electronic devices at distance, priced at the expected price and soared 76% in first-day trading.
  • Everyday Health, a leading provider of digital health and wellness solutions, priced in the middle of the range and declined 4% on its first day of trading.
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