iSpecimen (ISPN) aims to raise $20 million in an IPO of its common stock, according to an S-1 registration statement.

Lexington, Massachusetts-based iSpecimen was founded to create a marketplace connecting biopharmaceutical and academic researchers with a large selection of human biospecimens and related information.

Management is headed by founder, president and CEO Christopher Ianelli, who was previously founder and CEO of Abkine Pharmaceuticals and Managing Director at Leerink Partners, an investment bank.

Below is a brief overview video of the iSpecimen Marketplace:

Source: iSpecimen

The company’s primary offerings include:

  • Biospecimen procurement
  • Biospecimen data
  • Related services

iSpecimen has received at least $11 million from investors including Anna-Maria & Stephen Kellen Foundation and OBF Investments.

The firm seeks relationships with biospecimen and data providers as well as customers through a direct sales model and via its online service.

In addition, the firm markets through online social media and public relations efforts.

Sales and Marketing expenses as a percentage of total revenue have been uneven as revenues have increased.

The Sales and Marketing efficiency rate, defined as how many dollars of additional new revenue are generated by each dollar of Sales and Marketing spend, swung well into positive territory at 1.9x in the most recent reporting period.

According to a 2018 market research report by Grand View Research, the global market for biobanks was an estimated $52 billion in 2017 and is expected to reach $74 billion by 2025.

This represents a forecast CAGR of 4.5% from 2018 to 2025.

The main drivers for this expected growth are a 'rising demand for disease-specific biosamples, especially tumor cells to accelerate precision medicine research.’

Also, the use of human biospecimens is growing in cohort studies and the market for generating biospecimens is advancing with new technologies in genetic tools, raising the demand for high quality biospecimens.

Major competitive or other industry participants include:

  • UCL Virtual Biobank
  • Specimen Central
  • BIOMARKAPD
  • Northern Ireland Virtual Tissue Archive
  • EuroBioBank
  • BBMRI - ERIC
  • Thermo Fisher Scientific (TMO)
  • Lonza (LZAGY)

iSpecimen’s recent financial results can be summarized as follows:

  • Sharp growth topline revenue, from a small base
  • Increased gross profit and gross margin
  • Reduced operating loss and lowered negative operating margin
  • Lowered cash used in operations

Below are relevant financial results derived from the firm’s registration statement:

ispecimenpl

Source: Company registration statement

As of September 30, 2020, iSpecimen had $957,246 in cash and $20.6 million in total liabilities.

Free cash flow during the twelve months ended September 30, 2020, was negative ($2.3 million).

iSpecimen intends to raise $20 million in gross proceeds from an IPO of its common stock, although the final figure may differ.

Management says it will use the net proceeds from the IPO as follows:

to continue development and expansion of the iSpecimen Marketplace platform to support more diverse and complex data sets, improve search functionality (including patient/subject search), enhance user workflows, and optimize administrative and reporting functionality;

to expand our supplier development and management capabilities, including gaining access to more diverse and emerging healthcare data sets;

to grow our sales and marketing efforts, including internationally;

to repay the accrued and unpaid interest of the Bridge Notes;

for our operations and fulfillment function to support our expected growth in specimen orders; and

the remainder for working capital, business development opportunities, general corporate purposes, including expanding our legal, finance, and compliance capabilities to support operating as a public company.

Management’s presentation of the company roadshow is not available.

The sole listed bookrunner of the IPO is ThinkEquity.

Commentary

iSpecimen is seeking funding to expand its platform growth and marketing initiatives.

The company’s financials show strong recent topline revenue growth from a low base and nearly breakeven cash flow from operations in the most recent reporting period.

Sales and Marketing expenses as a percentage of total revenue have been uneven as revenues have increased; its Sales and Marketing efficiency rate has swung well into positive territory, a good signal.

The market opportunity for biospecimen activity is expected to grow substantially in the coming years, especially in the cancer market related to precision medicine approaches for treatment options.

ThinkEquity is the sole underwriter and IPOs led by the firm over the last 12-month period have generated an average return of negative (5.0%) since their IPO. This is a lower-tier performance for all major underwriters during the period.

iSpecimen is still a small firm but is operating in an industry with potentially strong growth characteristics that may act as a potent tailwind for its future trajectory.

When we learn more about the IPO’s pricing and valuation assumptions, I’ll provide a final opinion.

Expected IPO Pricing Date: To be announced.

Glossary Of Terms

(I have no position in any stocks mentioned as of the article date, no plans to initiate any positions within the next 48 hours, and no business relationship with any company whose stock is mentioned in this article. IPO stocks can be very volatile in the days immediately after an IPO. Information provided is for educational purposes only, may be in error, incomplete or out of date, and does not constitute financial, legal, or investment advice. Past performance is no guarantee of future results.)

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