While the life science industry waits to see whether the JOBS Act makes crowdfunding easier, one observer said the legislation already is encouraging initial public offerings among such companies.
A partner at a nationwide accounting firm said he's seeing increased IPO interest since Congress eased filing requirements.
"We're seeing an uptick in terms of the number of life science companies taking advantage of IPOs under the new rules," said the source.
Congress passed the law, Jumpstart Our Business Startups, last year to ease capital access to developing companies. It also has reduced financial disclosure requirements among "emerging growth companies," defined as those with less than $1 billion in annual revenue.
The law also allows emerging growth companies to keep initial correspondence with the SEC confidential.
The JOBS Act's stated goal is to make the process of going public simpler and less expensive, though critics argue the relaxing of rules hinders transparency.
The source declined to say which companies, or how many, are likely to follow through with IPOs in the coming months, though the capital markets have generally favored more initial public offerings this year. Three New Jersey life science companies completed IPOs in the first half of 2013: Cancer Genetics Inc., Omthera Pharmaceuticals and PTC Therapeutics.
The source said interest in IPOs spreads beyond life sciences, though early-stage companies in that industry are particularly eager for capital, given high costs and long waits required in getting drugs approved, which makes it difficult for them to raise money in the early going.
The JOBS Act also intended to make equity crowdfunding — where pre-public companies can raise capital online from large pools of small investors, under fewer restrictions than publicly traded companies — easier. But the SEC has yet to enact rules governing the process.
The source said companies will have to make a decision: "Is it better to go the IPO route, or the crowdfunding route? The business and science models will dictate some of that."
Speaking of Cancer Genetics, its shares haven't rallied much since going public, but a small-cap research firm that prides itself in discovering future blue chips is bullish on the Rutheford-based maker of cancer diagnostic tests.
Redchip has issued a target price of $26.75 by 2016 for shares of Cancer Genetics, which currently trade below $10.
Maitland, Fla.-based Redchip says Cancer Genetics is poised for strong revenue growth backed by a robust pipeline of molecular diagnostic tests that provide patients faster and more accurate diagnosis for cancer as well as more personalized oncology care.
The research firm cites that Cancer Genetics has five proprietary oncology tests, plus eight more in development.
"Having a large portfolio of tests reduces the dependence on any one test for success, thus reducing risk to investors," Redchip wrote in an Aug. 23 report.
The firm predicts Cancer Genetics revenue — $4.3 million in 2012 — will surpass $7.5 million this year, and exceed $101 million by 2016. Redchip also said Cancer Genetics' testing portfolio in three multibillion-dollar markets — hematological, urogenital and gynecological cancer — and its development partnerships with leading research organizations could make it a strong acquisition candidate.
CGI stock opened at about $11 when trading went public in April. Shares closed Aug. 28 at $9.77. The company earlier in August announced a public offering intended to raise $15 million, mostly to bolster its sales force.
Grapevine reports on the behind-the-scenes buzz in the business community.