ETF Edge

One under-the-radar biotech company could be your next big bet in the IPO market, says Renaissance Capital co-founder

Little-known biotech could be your next big IPO bet: Renaissance Capital co-founder
Little-known biotech could be next big IPO bet: Renaissance Capital co-founder

Investors are on IPO watch.

With some of 2019's initial public offerings, including those of ride-hailing giants Uber and Lyft, kicking off 2020 with meaningful gains, buyers might be wondering about the next big bet in the IPO space.

And, after last year's sweep of high-profile premiers — which also featured Beyond Meat, Pinterest and Levi Strauss — one under-the-radar name could be about to make waves with its debut, says Kathleen Smith, co-founder and chairwoman of data-focused exchange-traded fund issuer Renaissance Capital.

Renaissance Capital runs two IPO-based ETFs: the U.S.-based Renaissance Capital IPO ETF (IPO) and the Renaissance Capital International IPO ETF (IPOS).

Renaissance's strategy is to buy into the largest, most liquid companies entering the public markets. It includes a fast-track option to add particularly big IPOs to the portfolio more quickly than its standard process of refreshing the portfolio with the newest listings on a quarterly basis.

The U.S.-based ETF holds 57 stocks, Uber, Spotify, Vici Properties and DocuSign its largest positions as of the end of 2019.

Smith's next prospect, however, flies even more under the radar.

"The private equity category has huge companies that are lined up to go [public], and I think one worth paying attention to is PPD," she told CNBC's "ETF Edge" on Wednesday.

A contract research organization serving the biotechnology and pharmaceutical industries, PPD (short for Pharmaceutical Product Development) offers consulting, development services and clinical trial management to a range of drugmakers and bio companies.

It was acquired for nearly $4 billion by private equity firms Carlyle Group and Hellman & Friedman in 2011, and underwent a recapitalization in 2017 that added new minority investors and drove its valuation north of $9 billion.

For Smith, PPD provides investors with "a safe way to play biotechs because they do all the research studies for the biotech industry," she said. "It's a 25% top-line grower. It's a profitable company. It's got a very strong business. We think that there'll be others like this."

With PPD on track to hash out its IPO deal terms "within the week," according to Smith, Renaissance Capital is watching closely.

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