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Seer (SEER) has filed to raise $150 million from the sale of its Class A common stock in an IPO, according to an amended registration statement.

Redwood City, California-based Seer was founded to develop instruments to analyze proteins for basic research and discovery.

Management is headed by co-founder and CEO Omid Farokhzad, M.D., who was previously Professor at Harvard Medical School and co-founded BIND Therapeutics, Selecta Biosciences and Tarveda Therapeutics.

Below is a brief overview video of proteomics research:

Source: Sensu Film

The firm is developing what it calls the Proteograph Product Suite, 'which will leverage our proprietary engineered nanoparticle [NP] technology to provide unbiased, deep, rapid and large-scale access across the proteome.’

Investors in the firm have invested at least $167 million and include Maverick Capital, Invus Public Equities, aMoon Fund, Fidelity, Emerson Collective and T. Rowe Price.

According to a 2016 market research report by Grand View Research, the global market for proteomics was valued nearly $12 billion in 2015.

The market comprises three segments, Instrument, Reagents and Services.

The reagents segment has been the largest and fastest growing segment of the market.

The graphic below shows the historical and projected U.S. proteomics research market by segment:

seermkt

Key elements driving this expected growth are continued advancements in research and development efforts as well as more favorable regulations and government policies to support research activities.

Also, the fastest-growing application of proteomics research is its use in clinical diagnosis, while North America has represented the largest market by region, with its value expected to reach $9 billion by 2024.The Asia Pacific region is expected to see strong growth of more than 12% CAGR through 2024.

Major competitive vendors that provide or are developing related treatments include:

  • Roche Diagnostics (RHHBY)
  • Bio-Rad Laboratories (BIO)
  • Thermo Fisher Scientific (TMO)
  • GE Healthcare (GE)
  • Sygnis

Seer’s recent financial results show little revenue as the firm is still in the product development stage.

Below are the company’s financial results for the past two and ¾ years (Audited PCAOB for full years):

seerpl

Source: Company registration statement

As of September 30, 2020, the company had $121.5 million in cash and $8.4 million in total liabilities. (Unaudited, interim)

SEER intends to sell 8.825 million shares of Class A stock at a midpoint price of $17.00 per share for gross proceeds of approximately $150 million, not including the sale of customary underwriter options.

Class A shareholders will be entitled to one vote per share and Class B shareholders will have ten votes per share.

The S&P 500 Index no longer admits firms with multiple classes of stock into its index.

Multiple existing shareholders and SoftBank have agreed to purchase shares of up to $135 million in the aggregate at the IPO price in a concurrent private placement. This is a strong bullish signal from the firm’s investors and SoftBank as to the firm’s prospects.

Assuming a successful IPO at the midpoint of the proposed price range, the company’s enterprise value at IPO would approximate $975.7 million.

Excluding effects of underwriter options and private placement shares or restricted stock, if any, the float to outstanding shares ratio will be approximately 15.1%.

Per the firm’s most recent regulatory filing, it plans to use the net proceeds as follows:

approximately $65.0 million to commercialize our Proteograph Product Suite through our ongoing sales and marketing activities; and

the remainder for other development work associated with advancing our Proteograph Product Suite, research and development, and general corporate purposes.

Management’s presentation of the company roadshow is available here.

Listed underwriters of the IPO are J.P. Morgan, Morgan Stanley, BofA Securities and Cowen.

Commentary

Seer is seeking a large IPO amount for a product company that doesn’t have significant product revenue.

The firm’s system is planned for initial limited release among a small number of marquee clients in 2021. Management expects to begin broader commercialization in 2022.

The market opportunity for proteomics research instruments is substantial and expected to grow at a moderate rate over the medium term.

J.P. Morgan is the lead left underwriter and IPOs led by the firm over the last 12-month period have generated an average return of 85.4% since their IPO. This is a top-tier performance for all major underwriters during the period.

As to valuation, management is asking IPO investors to pay an Enterprise Value of nearly a billion dollars, not an inconsequential amount.

However, the strong interest by existing investors and SoftBank in the IPO is a relevant signal.

The SEER IPO is essentially a bet on the company’s CEO, who has an impressive background and track record of founding companies in the life science space.

It appears the firm’s existing investors are doubling down on his ability to succeed.

Although the interest by existing investors and the firm’s imminent launch into the market in 2021 are positives, I can’t come to a comfort level as to valuation of the IPO given the lack of product revenue, so my opinion is NEUTRAL.

However, I can understand how more ‘risk on’ investors might wish to buy at the IPO price along with major existing institutional investors.

NEUTRAL

Expected IPO Pricing Date: December 3, 2020.

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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