Medical diagnostics company LipoScience made a good impression on Wall Street Friday after becoming the first Triangle company to mount a successful initial public offering of common stock in nearly a year.
After selling 5 million shares at $9 apiece, LipoScience’s stock rose 16 percent in the first day of trading on the Nasdaq exchange to close at $10.45.
“Obviously, we are very excited,” said Art Pappas of Durham venture capital firm Pappas Ventures, which first invested in LipoScience a decade ago.
To get the deal done, however, LipoScience – like many life science companies in today’s sluggish IPO market – had to scale back its fundraising objective.
Earlier this month the company filed plans to sell 5 million shares at $13 to $15 per share, but on Thursday it dialed back its expectations to $9 to $10 per share. Underwriters set the final price of $9 per share.
John Fitzgibbon Jr., who tracks new stock offerings for IPOScoop.com, said of the stock’s first-day jump: “They left some money on the table, and it worked out. … They got a winner on the stock.”
Pappas said that although the company didn’t raise as much money as it originally targeted, going public puts it in position to raise additional capital from investors as the company’s revenue rises going forward.
“We continue to be very, very bullish on LipoScience and Rick’s leadership,” Pappas said, referring to CEO Richard O. Brajer.
Pappas Ventures owns a 4.9 percent stake in LipoScience. The company upped its investment in the company by purchasing IPO shares at the same $9 price that other investors paid.
Champagne corks presumably popped at LipoScience’s headquarters, but no details were forthcoming. LipoScience had 204 employees as of Dec. 31.
“Unfortunately, at this point in time, we are really not making any statements to the media,” said Ashok D. Marin, vice president and general counsel. He cited securities regulations that limit what companies can say immediately after an IPO.
Optimism for more deals
The last Triangle company to go public was Cempra, a Chapel Hill drug-discovery company that raised nearly $48 million in February.
“To have another one this year is continuing a really good trend,” said Don Reynolds, a securities lawyer at Wyrick Robbins Yates & Ponton. “To have one this early in the year makes you cautiously optimistic that maybe some other people can get some deals done this year.”
When companies raise money by going public, “that means more jobs,” Reynolds added. “It’s all good fuel for the local economy.”
In addition, “more public companies would mean more prestige,” he said.
Pappas said he knows of three Triangle life science companies considering going public this year, although they are looking also at alternative fundraising efforts.
Bloomberg News, citing two people familiar with the situation, reported in September that Durham-based Quintiles, the world’s largest pharmaceutical services company, might file for an IPO within the next 18 months. Quintiles has side-stepped questions about going public.
IPO to fund expansion
LipoScience expects to receive net proceeds of $38.6 million from the IPO after deducting expenses. The company plans to use the money to expand its 73-person sales and marketing staff, and fund further research-and-development, among other purposes.
LipoScience generated $41.2 million in revenue over the first nine months of 2012, a 24 percent increase, and generated $1.1 million in net income during that span. However, the company noted in a Securities and Exchange Commission filing that it expects to lose money over the next several years as it ups spending “in an effort to increase market share for the NMR LipoProfile test and to develop new diagnostic tests.”
The NMR LipoProfile test, which assesses patients’ risk of heart disease, generates the bulk of LipoScience’s revenue. Until recently the test could be performed only by the company’s technicians in Raleigh, but in August the company won regulatory approval for a highly automated system designed to be used by lab companies.
LipoScience, which was founded in 1994 and began operations in 1997, has long harbored ambitions to go public.
It filed IPO plans in 2002 but later scrapped them. It began its second run at an IPO with an SEC filing in June 2011, but didn’t reach the finish line until Friday.