2013 IPOs : best & worst

Update: Prosensa Holding (RNA) was acquired by BioMarin Pharmaceutical (BMRN) for $840 million. (November 2014)

• Best: Container Store, Potbelly, Noodles & Co., Sprouts Farmers Markets
• Worst: Prosensa Holding (RNA), LipoScience (LPDX)

Potbelly. Noodles & Co. Sprouts Farmers Markets. These are all the huge winning initial public offerings this year. These are the deals most people like to talk about because they've all more than doubled from their IPO prices.

But investors will have a tougher time finding others bragging about buying into IPOs that didn't fare so well this year. And there have been plenty of dogs in what's been a pretty solid year for IPOs.

All three of the worst performing IPOs in 2013 so far have been health care deals, says IPOScoop.com. Prosensa Holding (RNA), a biotech company working on treatments for diseases including muscular dystrophy, is down more than 66% from the $13 a share offering price. The company disappointed investors in September when saying one of its top drugs in development didn't make it to late-stage clinical trials.

Following Propensa is LipoScience (LPDX), a maker of diagnostics to test patients, which has seen its shares fall 48% from its IPO price of $9 a share. The company told investors in August that demand for its diagnostics test wasn't growing as fast as its costs were. The company lost $2.4 million in the quarter ended in June. And behind LipoScience as the worst IPO of the year is KaloBios (KBIO), down 48% from its $8 a share IPO price.

These big disappointments in the IPO market are a reminder to investors that making money on unproven stocks isn't as easy as it might seem. Even though the IPO market is raging, and most IPOs are doing well, there are still the laggards.

First-day pops: The Container Store, a retailer that sells organizational materials such as shelves and storage boxes, saw its shares more than double in value on the first day of trading after the initial public offering last week. The shares rose from its $18 a share to $36.20 a share. Container Store was the fifth U.S.- listed IPO to double in its first day of trading this year.

It is the biggest year for 100 per cent one-day jumps since 2000. In 2012, just one IPO, a company named plunk, doubled on its first day, said Jay Ritter, professor of finance at the University of Florida. No IPOs doubled on their first day in 2009, 2008 or 2007, Ritter said. IPOs on average have gained 16 per cent on their first day this year, Renaissance said, the highest in at least a decade.

Strong deal pricing. Demand has been so strong for new share issues that underwriters aren’t cutting the price to stoke demand. So far this year, just 28 per cent of IPOs have been priced below their initial expected price range, showing a sign of strength not seen since 2009, analyst Renaissance Capital said.

Busy calendar of deals. Already this year, 182 companies have seen their shares start trading, up 50 per cent from this point last year, said Renaissance. At the current pace, there could be 220 IPOs in 2013, making it the busiest year for IPOs since 2000 by topping the 217 deals in 2004, Renaissance said.

LipoScience files for $86M IPO

Raleigh, North Carolina-based LipoScience has filed with securities regulators plans to raise up to $86.2 million in an initial public stock offering. It’s the second time LipoScience has flirted with a public stock offering. The company filed IPO plans in 2001, only to withdraw them in 2002 due to market conditions. 

But recent market conditions have improved; LipoScience’s IPO would follow the Durham company Tranzyme Pharma‘s (NASDAQ: TZYM) $48 million public offering in April.

LipoScience plans to use proceeds from its stock offering to expand its sales and marketing and fund continued R&D for new tests to supplement an already commercialized blood test to gauge the risk of cardiovascular disease. LipoScience is targeting the cholesterol testing market, which represents an estimated 75 million tests each year in the United States.
Last year, LipoScience recorded more than 6 million orders for its lipoprotein test and the company reports that from 2006 to 2010, test orders have increased at a compound annual growth rate of approximately 30 percent. That growth has been helped by insurance industry acceptance of the test. The NMR LipoProfile test is covered by a number of payors including Medicare, TRICARE, WellPoint, United HealthCare and several Blue Cross Blue Shield affiliates.

“We plan to significantly increase our geographic presence across the United States to expand market awareness and penetration of the NMR LipoProfile test, with the goal of ultimately becoming a clinical standard of care,” the company said in the filing.

LipoScience’s proprietary blood test counts the number of lipoprotein particles in a blood sample in order to gauge cardiovascular risks. LipoScience’s patented technology uses nuclear magnetic resonance to test for lipoproteins, which the company says are a better measure of cardiovascular risk than cholesterol levels.

The testing technology was developed at North Carolina State University by biochemistry professor James Otvos, who is now the company’s chief scientific officer.Otvos founded LipoScience in 1994 and by 1999, the company had developed tests to sell to clinicians and diagnostic laboratories. Investors in the company include Durham, North Carolina-based Pappas Ventures and Three Arch Partners, a Bay Area venture firm.

When LipoScience pulled its IPO plans nine years ago, the company’s revenue was $18.5 million. According to LipoScience’s most recent filing, the company generated $39.3 million in 2010 revenue. The company turned a profit of $4.3 million last year. But the filing notes that although LipoScience recorded profits in 2009 and 2010, it incurred a $500,000 loss in the first quarter of 2011. The company does not expect to be profitable this year or in coming years as it expands its growth strategy for its NMR LipoProfile test and develops new diagnostics. The company is also developing tests for diabetes and other diseases.

LipoScience expects that its latest diagnostic device should raise the market potential for its blood tests even more. Right now, blood samples using LipoScience’s tests must be sent to the company’s Raleigh headquarters to complete the testing because it’s the only facility with the proper equipment. But the company has developed a machine, called Vantera, that will allow institutions or laboratory testing facilities to complete that testing at their own sites. Vantera has already been site tested at a number of facilities across the country, including the Mayo Clinic and the Cleveland Clinic. LipoScience plans to file with the U.S. Food and Drug Administration for 510(k) clearance on Vantera by the end of this year.