US Mid-Market Equity House: Cowen

IFR Awards 2020
5 min read
Robert Sherwood

Biotech bullseye:
Covid-19 indelibly changed the US ECM landscape in 2020. With its market-leading biotech franchise and efforts in related sectors enabling it to crack the top 10 in US ECM, Cowen is IFR’s US Mid-Market Equity House of the Year.

US Mid-Market Equity House

In a year when innovation in healthcare made headlines more than ever before, Cowen’s leading position in the already booming sector paid huge dividends and saw it outmuscle even bulge-bracket firms as it broke into the top 10 in the US.

Cowen earned league table credit of US$7bn as a bookrunner on 113 deals during the IFR Awards period for a ninth-place finish in the US common stock league table, rising two spaces from the previous year.

The bank worked on transactions that raised over US$10bn for healthcare names including biotechs and medical device makers. On biotech IPOs, Cowen was a bookrunner on 25 floats totalling US$1.9bn, second by volume behind only Jefferies and more than heavyweights JP Morgan, Goldman Sachs and Morgan Stanley.

The healthcare sector has always been central to Cowen, whose more than 50 analysts cover 800 companies across eight industry verticals.

“Our biotech fee stream has never been higher,” said Grant Miller, Cowen’s head of capital markets. “We have taken steps to become less dependent on biotech, but it is still the biggest part of what we do.”

Even before Covid-19 lockdowns took effect in the US in mid-March, Cowen led four biotech IPOs – Black Diamond Therapeutics, Arcutis Biotherapeutics, Revolution Medicines and PassageBio. It was also lead-left on IPOs for Avidity Biosciences and Spruce Biosciences once the onset of the pandemic forced banks to adopt virtual marketing.

Arcutis and Revolution both returned to market with first-time follow-ons later in the year.

Cowen has also shown patience in supporting emerging corners of the healthcare world where fee streams have proven slower to develop than others.

For example, after going public in 2018, Twist Bioscience, a leader in the new field of synthetic biology, evolved into a serial issuer in 2020.

Cowen was a bookrunner on three Twist follow-ons in the year that raised US$572m of total proceeds, including a US$308m raise in December priced at US$110 a share, up seven times from its IPO price.

While cannabis as an investment theme has faced its share of problems, the sector is again in the spotlight ahead of renewed federal legalisation efforts. While ECM activity was light, Cowen’s leadership in the area was underlined when it advised Tilray – the first cannabis grower to list on a US exchange – on its US$4bn merger with fellow Canadian grower Aphria in December.

In another example of its leadership in uncovering new investment themes, Cowen played its part in investors’ embrace of alternative medicines as a bookrunner on psychedelics developerCompass Pathways’ US$128m Nasdaq IPO in September.

Given those variations on a theme, it would be easy to label Cowen a one-trick pony, though that would miss the point.

The firm has been instrumental in expanding the sector’s traditional boundaries by aggressively banking adjacent areas such as healthcare-related software and tools and diagnostics.

“The firm has made strategic choices to find ways to build around its core strengths in concentric circles,” said Larry Wieseneck, co-president at Cowen.

To that end, the US$178m Nasdaq IPO of Berkeley Lightswas a landmark transaction.

As a “digital cell therapy specialist” operating somewhere between the healthcare and tech investment themes, Berkeley took some time for investors to get their heads around.

But after pricing a US$178m IPO in July at US$22, Berkeley was able to return in November within the lockup period to price a US$258m first follow-on at U$86 (the shares traded as high as US$123 in December).

Banking medical tools and diagnostics falls under Michael Campbell, who heads the firm’s non-biotech healthcare efforts. Working in partnership with Doug Schenkel, Cowen’s senior research analyst in the sector, Campbell has spent 15 years building Cowen’s medical tools and diagnostics franchise.

Their efforts are now bearing fruit in abundance.

On December 17, Cowen capped a frenetic year as the lead left bookrunner for spectrometer maker 908 Devices’ US$149.5m Nasdaq IPO, the last major US IPO of 2020. Its shares closed on Christmas Eve just shy of US$68 versus the US$20 IPO price.

“Given the massive market opportunities in medical tools and diagnostics, we expect a tsunami of deals in the next five years,” said Campbell.

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