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IPO market hits new heights

The second quarter of 2014 was the strongest quarter in decades for companies entering the stock market, with 91 initial public offerings filed raising $23 billion, according to a report released Thursday by the Ernst & Young consulting firm.

And that growth is likely to continue through at least the second half of the year, including a growing number of filings expected in San Diego.

"The pipeline is extremely full," said Doug Regnier, who heads Ernst & Young's IPO operations along the West Coast. "Some companies are in registry (for an IPO), while others are getting ready to file."

During the first half of the year, there were 162 IPOs filed nationwide, a 71 percent increase from the same period last year. The stock offerings generated $35 billion in capital, a 50 percent jump from the previous year.

In San Diego, there have so far been six IPOs in the first half of 2014 worth $283 million, compared to just two in the first half of 2013 that raised $148 million.

Another local firm, Lumena, announced plans to launch an IPO in April but instead was bought for $260 million by Ireland's Shire Pharmaceuticals (Nasdaq: SHPG). And it's possible that one other firm may go public before the first half ends on Monday: Ambrx (Nasdaq: AMBX), a firm that is trying to discover and develop protein therapeutics to treat problems ranging from weight management to cancer.

Ambrx was slated to go public on Wednesday, but is now listed as a day-to-day IPO candidate, with hopes of raising $70 million with a target share price of $12 to $14.

Despite the postponement of the rollout, Ambrx has been getting positive reviews from analysts and potential investors. In a column on the Seeking Alpha stock website, Don Dion, owner of DRD Investments in Florida, announced he might make a long-term investment in the stock shortly after its release, based on Ambrx's collaborations with Merck (NYSE: MRK), Eli Lilly (NYSE: LLY) and Bristol Myers Squibb (NYSE: BMY).

"We are positive on this IPO and suggest biotech investors be so as well," Dion wrote.

The market for new faces in the pharmaceutical field has been so strong that Receptos Inc. (Nasdaq: RCPT), a local biopharmaceutical firm that raised $83 million when it went public last year, went back to the trough early this week with a second offering that raised $178 million. Since its launch in May 2013, the stock price at Receptos, which is trying to develop therapies for immune and metabolic diseases, has risen from $14.20 to $39.98, although that's down from a short-lived peak above the $50 mark in March.

Regnier says that the current interest in IPOs has been a stark contrast to a long period of sluggishness from 2011 through the first half of 2013, when the market was stalled by the relatively stagnant economy. The current growth, he says, was fueled by a pickup in real-estate prices, which put more money in investors' hands.

At the same time, growing projections of strong growth among the world's pharmaceutical giants, such as Merck, Eli Lilly and Bristol Myers, helped fuel interest in the IPOs of the smaller laboratories that work with them to develop new products, Regnier said.

Regnier said the market was a little rocky this spring, when speculators – drawn by the growing IPO activities – pounced into the market, pushing the stock prices sky high in spring, and then quickly exited, resulting in a sharp drop-off.

Once those "non-traditional investors" left the market, he said, it left the traditional investors who target companies based on their fundamentals, such as what "milestone payments" they expect to receive from their big pharmaceutical partners. He added that because those investors tend to be very well-informed about the market, they tend to keep IPO prices from getting unrealistically high.

In addition to Ambrx, the San Diego IPOs that have gone public so far this year include:

* Auspex Pharmaceuticals (Nasdaq: ASPX), developing treatments for "orphan diseases," with a $96 million launch.

* Vital Therapies, $62 million. Vital had previously planned on going public with an $86 million IPO last year priced at $16 to $18 per share, but postponed the launch until April after shaving the price to $13 to $15 per share.

* Ignyta Corp. (Nasdaq: RXDX), conducting Phase 1 trials for treating solid tumors, $55.2 million.

* Celladon Corp. (Nasdaq: CLDN), a gene therapy firm, $50.6 million.

* Biocept Inc. (Nasdaq: BIOC), working on a proposed treatment for breast cancer, $19 million.

The next to join the list may be Pfenex, which is working with protein therapeutics to address such problems as macular degeneration, a chronic eye disease. Early this month, Pfenex filed its intention to launch a $75 million with the Securities and Exchange Commission.

In addition, Fortune magazine this month predicted that San Diego's Tealium may be ready for an IPO after raising $47 million in venture capital funding.

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