Successful Genoptix debut leads IPO parade

While broader markets gyrated, a handful of private equity-backed offerings managed to make their debuts last week, with returns ranging from spectacular to mediocre.

In all, three PE-funded companies went public. They are Genoptix, a provider of diagnostic services, which raised $85 million in its IPO; Deltek, a project management software developer, which raised $162 million; and Nanosphere, a developer of genomic testing technology, which raised $98 million.

The IPOs come as backlog of companies are in IPO registration. In fact, the pipeline of pending deals is reaching proportions comparable to the dot-com boom 10 years ago, with venture-backed tech companies leading the surge.

More than 40 companies that have raised a round of venture funding in the last year are currently in registration to launch an IPO on a U.S. exchange, according to Thomson Financial (publisher of PE Week). The list includes several Internet and tech companies. The estimated value of the backlog of IPOs stands at more than $25 billion, the highest level since 2000, according to data tracker Dealogic. The VC-backed portion of that is more than $3.5 billion, according to PE Week’s analysis.

Of the three companies that went public last week, Genoptix was the only one to deliver a big first-day pop. Shares of the Carlsbad, Calif. company, which provides diagnostic tests for malignancies in the blood and bone marrow, priced at $17 when it debuted on Oct. 29, above the projected range of $14 to $16 a share. The stock rose nearly 50% in first-day trading to close just over $25.

Investors who stand to profit from the offering include Enterprise Partners Venture Capital, the largest stockholder of Genoptix, which holds 3.5 million shares that are valued at about $88 million. The liquidity for Enterprise Partners comes less than a few weeks after the The La Jolla, Calif.-based VC firm said that it has indefinitely suspended fund-raising for its seventh fund. The firm, which was founded in 1985, was planning to raise a $300 million vehicle with a 50/50 allocation to IT and life sciences.

The recent departures of two managing directors were closely tied to the firm’s decision to postpone fund-raising.

Other large shareholders of Genoptix include Alliance Technology Ventures (with 2.6 million shares), William Blair Capital Partners (1.3 million shares), Chicago Growth Partners (1.2 million shares), Tullis-Dickerson Capital (1.2 million shares) and Excelsior Venture Partners (788,000 shares). Between 2000 and 2005, Genoptix raised $59 million from these and other investors.

Genoptix’ strong IPO performance follows several quarters of impressive revenue growth. It posted sales of $13.9 million and a profit of $3.8 million in the second quarter, compared to sales of $5.3 million and a loss of $1.3 million in the same quarter a year ago.

Nanosphere, another diagnostics company which specializes in genomic and protein testing, also had a good stock price gain on opening day. Shares of the Northbrook, Ill.-based company priced at $14, the bottom of the projected range. The stock climbed 14% in first-day trading to close at $16 a share.

Nanosphere raised $80 million in venture funding between 2000 and 2006 from such investors as Bain Capital, Lurie Investment Fund, NGEN Partners, Allen & Co. and Brookside Capital.

Brookside Capital is the company’s largest shareholder, controlling 23%, or 5 million shares, following the offering. In its prospectus, Nanosphere also stated that Brookside indicated an interest in purchasing $12.5 million in stock at the initial offering price.

Other private equity investors with sizeable stakes in the company include Lurie Investment Fund (4.2 million shares), Bain Capital (2.1 million shares) and Alpha-Tech (1.3 million shares).

Deltek, a profitable software company that posted double-digit revenue growth over the past year, had a more disappointing debut last week. The Herndon, Va. company priced its 9 million share offering at $18 per share, the middle of its projected range. Shares were relatively flat in first-day trading last Thursday, closing at $17.95 a share.

Still, the offering provided a sizeable return for Deltek’s majority shareholder buyout firm New Mountain Partners, which raised $1.7 billion for its third fund earlier this year. The New York-based firm and affiliated investors own more than 70% of the company, a stake valued at close to $540 million, as of Thursday’s close.

New Mountain paid $170 million for the company in 2005.