I comment on two recent IPOs and two secondary offerings.
One IPO is very interesting in its resemblance to another recommendation of mine on which readers have done well.
The pricing of the two secondary offerings offers readers an interesting lesson on timing and institutional demand.
The last of these stocks offers an intriguing run-up and revaluation opportunity for readers with a medium-term time frame.
In the future, as my time permits, I look forward to commenting on other deal pricings and events of interest.
Deciphera Pharmaceuticals (DCPH)- The company priced its initial public offering of 7.5 million shares at a price point of $17. Gross proceeds will be around $127 million, depending on the allotment to underwriters. Not only was the IPO priced at the high end of the proposed range but also shares are currently trading at $18.99 (significantly above).
My readers didvery wellon Blueprint Medicines (BPMC) – this smaller competitor is worth keeping an eye on and could do well in the medium to long term. Check out its impressive (if early-stage) pipelinehere.
Figure 1:Pipeline (Source: Company Website)
Nightstar Therapeutics (NITE)- While this IPO was priced at $14 (5.36 million shares of common stock), shares opened at $17.25. Even after the 20% decline on Friday, shares are still trading comfortably above their opening price. Gene therapy stocks have been doing well in 2017, and the company islooking to finish up a pivotal trialof its chloroideremia drug candidate and progress two other gene therapy candidates for eye indications in early trials. I believe this one could have a significant dip offering investors a better entry point in 2018.
Intra-Cellular Therapies (ITCI)- The companypriced its secondary offeringof 9.7 million shares at $15.50 per share, with proceeds amounting to around $140 million. I recentlywrote a follow-up pieceon the company on September 1st describing how lead drug candidate ITI-007 could see significant penetration in the schizophrenia market due to a differentiated safety profile and other potential advantages. It is estimated that the drug could do over $1 billion in sales after expansion into other indications, such as bipolar depression and agitation in patients with dementia.
Still the timing of the offering and pricing bode poorly for near-term upside in my opinion.
Ascendis Pharma (ASND)- The companypriced a very strong secondaryoffering of 3.8 million ADSs at a price of $35.50 per ADS. Net proceeds amounted to around $126 million.
Ascendis appears to be a clear winner after rival Versartis (NASDAQ:VSAR) lead candidate for treating pediatric growth-hormone deficiency flunked its pivotal trial. TransCon hGH could have peak sales above $1 billion and data is around a year out – high risk here shouldnt be discounted, but I believe the stock will be considerably higher prior to data being announced. Readers who buy with a medium-term time frame could likely profit and take risk off the table prior to the read-out.
Figure 4:Comparable hGH levels for TransCon Growth Hormone and Daily hGH in mid-stage study (Source: Corporate Presentation)
In the future I plan on highlighting other IPOs and secondary offerings as time permits. By analyzing price action and institutional demand, there are many lessons to learn and intriguing ideas can often be discovered. This is one more tool in addition to scans that readers should put into practice.
Authors note:My goal is to bring to readers attention to undervalued stocks with catalysts that could propel shares higher, as well as provide a fresh perspective on stocks you may already be aware of. I also touch on planning trades and risk management, as those are two areas I feel are often neglected.If you found value in the above article,consider clicking the orange follow buttonand getting email alerts to receive my latest content. My sincere appreciation for readers who add value and join the discussion in the comments section, as well as those who share my work with others who could benefit from it.
Disclaimer:Commentary presented is not individualized investment advice. Opinions offered here are not personalized recommendations. Readers are expected to do their own due diligence or consult an investment professional if needed prior to making trades. Strategies discussed should not be mistaken for recommendations, and past performance may not be indicative of future results. Although I do my best to present factual research, I do not in any way guarantee the accuracy of the information I post. Investing in common stock can result in partial or total loss of capital. In other words, readers are expected to (and encouraged) form their own trading plan, do their own research and take responsibility for their own actions. If they are not able or willing to do so, better to buy index funds or find a thoroughly vetted fee-only financial advisor to handle your account.
Disclosure:I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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