IPO market shows signs of recovery

The IPO market showed signs of recovery last week, with two private equity-backed offerings and one new registration.

Notably, both of the new public offerings came from Nashville, Tenn.-based companies with business models tied to the health care industry. The reception that Cumberland Pharmaceuticals, a drug distributor, and Emdeon Inc., a provider of billing software, received from public market investors, however, differed markedly.

With the debut of Cumberland Pharmaceuticals, VCs broke a long dry spell for venture-backed pharmaceutical companies. The company, which markets a variety of drugs, including pain and fever treatments, was the first venture-backed company in the life sciences sector to go public since the first quarter of last year.

Emdeon (NYSE: EM), made its debut Tuesday and finished its first day of trading up about 7%, at $16.52 per share. The company, which develops software that links U.S. health care providers with insurers. sold 23.7 million shares at an initial price $15.50, raising about $367 million. The IPO provided a partial exit for General Atlantic and Hellman & Friedman, which bought a 48% stake in the company from HLTH Corp. last year for about $575 million. General Atlantic had bought a 52% interest in Emdeon from HLTH in November 2006 for about $1.2 billion.

Last year, Emdeon reported sales of $853.6 million and profit of $11.9 million.

Cumberland (Nasdaq: CPIX) had a chillier first-day reception. The company priced its 5 million share offering at $17 a share, below the anticipated range. Its shares fell 1% in first-day trading. Still, the IPO provided a highly profitable exit for S.C.O.U.T. Healthcare Fund, which financed a $500,000 venture round and a $1 million debt round in 2004 and 2003, according to Thomson Reuters (publisher of PE Week). The firm is listed as owning a 6.6% stake in the company prior to the offering. That stake was worth $11.7 million based on the stock’s first-day closing price.

Last week, VCs also ended what had been an unusually quiet period for IPO filings. Fortinet, a Sunnyvale, Calif.-based network security provider, filed in August for a $100 million IPO, with Morgan Stanley as lead underwriter. The company has raised about $83 million in VC funding since 2002 from Redpoint Ventures, Meritech Capital Partners, Acorn Campus Ventures, DCM, Defta Partners and WI Harper Group.

Private equity-backed InfrastruX Group Inc., a Bellevue, Wash.-based provider of utility infrastructure construction and maintenance services, also filed for what it expects to be a $290 million IPO. It plans to trade on the NYSE under ticker symbol IFR, with Credit Suisse and UBS serving as co-lead underwriters. The company is owned by Tenaska Power Fund, and generated $827 million in 2008 revenue.

Meanwhile, Rosetta Stone Inc. (NYSE: RST), a maker of language-learning software that went public earlier this year, has filed to sell about 4.1 million shares via a secondary offering. Selling shareholders include ABS Capital Partners and Norwest Equity Partners. —Joanna Glasner