Last week, the Nasdaq welcomed four new companies following their initial public offerings. The slate contained a consumer products company alongside three healthcare companies. Let's see what these companies do and how the stocks performed in the initial days of trading.
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Black Diamond Therapeutics
Oncology drug developer Black Diamond Therapeutics (BDTX 5.95%) thrust out of the gate selling 10.6 million shares at $19. Hovering around $38 per share today, the stock is well above both its IPO price and its initial opening price of $33 per share. The company, led by industry veteran David Epstein, now sports a valuation of $1.3 billion. Even with all the enthusiasm from biotech investors, the lead cancer drug will only start its initial human clinical trials in the first half of this year. Stay tuned to see if the heady valuation remains in the absence of human clinical trial data.
Arcutis Biotherapeutics
Like Black Diamond, Arcutis Biotherapeutics (ARQT 1.49%) successfully launched into the public market. The company raised approximately $159 million by selling 9.375 million shares at $17 each through a consortium of investment banks, including Goldman Sachs and Cowen. The money will fund the development of the company's dermatology pipeline, including a phase 3 clinical trial in psoriasis, for its most advanced drug candidate, ARQ-151. Following the $17-per-share pricing, the stock opened on its first day of trading at $23.05. It is currently trading at $25.23. With three drugs in various clinical trials, Arcutis' valuation of roughly $924 million looks attractive next to Black Diamond, which has yet to put a drug into human testing.
1Life Healthcare
Raising $245 million in its IPO, 1Life Healthcare (ONEM), through its One Medical brand, aims to transform how patients receive and connect with primary care health services. Investors can now own a piece of a company combining membership-based health services integrating state-of-the-art technology to eliminate the frustrations that often accompany medical services. Backed by a stable of private equity firms, such as The Carlyle Group, Benchmark Capital Partners, and Oak Investment Partners, 1Life also boasts an investment from Google Ventures. Not surprisingly, Alphabet's Google offers the 1Life memberships to its employees and represents more than 10% of 1Life's revenue. The stock opened at $18 following an IPO price of $14. Currently the shares trade around $24, which should make investors happy all around.
Reynolds Consumer Products
By far the largest deal of the week, and the only IPO not related to healthcare, was Reynolds Consumer Products (REYN -0.35%). Known for everyday items found in homes across the country, like Reynolds Wrap, foil, and Hefty brand trash bags, the company raised more than $1.2 billion by selling 47.17 million shares at $26 a piece. The stock did not jump out of the gate like some of the other IPOs last week; instead it opened at $27.50 per share and is now trading around $30. Why the slow start? The largest shareholder of the company -- Packaging Holdings of New Zealand -- still controls 77% of the stock. Thus the new shares represent 23% of the outstanding shares. Unlike the other IPOs last week, Reynolds plans to pay shareholders dividends. The first one will be for $0.15 a share, followed by $0.223 per share for each of the remaining quarters.
Should you buy?
The question now is whether these companies should be on your radar. Let's work backwards. Reynolds should generate around $2.9 billion in revenue, but sales seem relatively flat. However, it is tough to bet against iconic brands and quarterly dividends. This is the conservative pick. 1Life continues to build its health network and, like Reynolds, earns revenue. It is early, and healthcare remains a highly regulated, fragmented industry. Buy 1Life if you want to co-invest with some marquee private equity firms and Google Ventures.
Black Diamond and Arcutis provide the greatest speculation. Investing in biotech is inherently risky, particularly in development-stage companies. Arcutis has more drug candidates in more clinical trials, which will drive news flow. Black Diamond has a seasoned team and promises to deliver personalized cancer treatment based on a cancer's genetic profile. These two, while more speculative, will likely see the greatest stock appreciation if successful.
