The IPO Buzz: Tough Medicine for IPOs

The deals are Anthera Pharmaceuticals (Nasdaq: ANTH – proposed), a Hayward, California-based pharmaceutical company with no revenues and an accumulated deficit of $62.5 million, and Sprott Physical Gold Trust (NYSE: PHYS – proposed and PHY – proposed – on the Toronto Stock Exchange), a Toronto-based investment trust that plans to use the proceeds from the sale of 75 million units at $10 each to acquire physical gold bullion.
 
Now back to the “real” IPO of the week and pharmaceuticals in general. In short, it’s been a tough time for companies from this industrial sector to go public.
 
Since the beginning of January 2009, only three pharmaceutical IPOs have been priced, according to the U.S. Securities and Exchange Commission’s filings. They have raised $317.5 million.
 
In contrast, over the same time period, 126 IPOs have been priced. They raised $25.8 billion.
 
(Note: Pharmaceutical companies have been assigned the SEC’s Standard Industrial Classification (SIC) Code Number of 2834. Biotechnology companies have been assigned the SIC Code Number of 2836. There is no SIC code number for biopharmaceutical companies.)
 
One of the reasons these deals have not turned on IPO investors is simple — the industry’s lackluster stock market performance.
 
Over the last 52-weeks, the Dow Jones U.S. Pharmaceuticals Index (DJUSPR) has been strong, UP 24 percent through Friday’s close of 251.52, UP from 202.80 on Feb. 20, 2009. But it’s been a laggard compared with the NASDAQ Composite Index. The NASDAQ closed on Friday at 2,243.87, UP 55.7 percent from its close 52 weeks ago at 1,441.23.
 
Cut A Deal – Cancel My Order
Facts have shown us that all three pharmaceutical deals have had trouble getting out the door. Each IPO was priced below its initial filing range and each struggled in the aftermarket.
 
The three deals were:
  • Cumberland Pharmaceuticals (NASDAQ: CPIX) was priced on Aug. 10, 2009, at $17 per share, DOWN from a filing range of $19 to $21, and closed its opening day at $16.83, DOWN 1 percent. It closed Friday, Feb. 19, 2010, at $11.78, DOWN 30.7 percent from its initial offering price.(Note: Thomson ONE Analytics reports analysts rate Cumberland as a “BUY” with a 12-month price target of $21 per share, UP about 78.3 percent from current levels.)
  • China Nuokang Bio-Pharmaceutical (NASDAQ: NKBP) was priced on Dec. 10 at $9 per share, DOWN from a filing range of $10 to $12, and closed its opening day at $8.67, DOWN 3.67 percent. It closed Friday at $7.82, DOWN 13.7 percent from its initial offering price. (Note: Thomson ONE reports analysts rate China Nuokang as a “STRONG BUY” with a 12-month price target of $12 per share, UP about 53.5 percent from current levels.)
  • Ironwood Pharmaceutical (NASDAQ: IRWD) was priced on Feb. 3 at $11.25 per share, DOWN from a filing range of $14 to $16, and closed its opening day at $11.65, UP 3.56 percent. It closed Friday at $13.10, UP 16.4 percent from its initial offering price, but still below its filing range. (Note: Ironwood is still in its 45-day “quiet period” and no recommendations, estimates or price targets are available.)
This brings us back to this week’s single IPO — Anthera Pharmaceuticals with its SIC Code Number of 2834 — pharmaceutical.
 
Anthera plans to offer 4.61 million shares at $13 to $15 each to raise $64.5 million. The deal is expected to be priced Tuesday evening, Feb. 23, and to trade on Wednesday morning.
 
To see how the IPO might trade in the aftermarket, compare its final pricing terms to its initial filing terms. If the piecing terms are lower, don’t expect an opening-day moonshot.
 
 
Disclosure: Neither the author nor anyone else on the IPOScoop.com staff has a position in any stocks mentioned, nor do they trade or invest in IPOs. The author and IPOScoop.com staff do not issue advice, recommendations or opinions.