ReproCell Inc., a stem-cell medical research company, is heading for the biggest opening jump for a Japanese initial public offering in nine years.
Shares of the biotech company were untraded a second day after debuting on Osaka’s JASDAQ exchange yesterday. The stock was bid at 17,510 yen as of 3 p.m. in Tokyo and is poised to open trading 447 percent higher than its IPO price of 3,200 yen. Buy orders outnumbered sell orders by about 4-1.
Founded in 2003, ReproCell was the first company licensed to generate induced pluripotent stem cells, or iPS cells, according to the company website. Kyoto University professor Shinya Yamanaka won a Nobel Prize for medicine in October after discovering a new way to transform ordinary skin cells into iPS cells. Riken, a state scientific research institute, said the cells have potential for treating cancer.
“Investors are focusing on the dream,” said Toshiaki Iwasaki, an analyst at Mito Securities Co. Ltd. “They are buying because of optimism about iPS. Investors are also hopeful that ReproCell’s technology will be used by cosmetic companies as well as pharmaceutical firms.”
If the shares open at the current price, this will be the largest surge on a Japanese trading debut of greater than $10 million in value since Message Co. soared 426 percent in 2004, according to data compiled by Bloomberg. Message, which operates nursing homes, reached its highest on May 6, 2004, two weeks after its debut. The stock has since slumped 75 percent.
The Japanese government yesterday approved the world’s first clinical research using iPS cells, according to the Nikkei newspaper. Riken and the Foundation for Biomedical Research & Innovation won clearance from the Health Ministry and plan to use iPS cells for retinal regeneration, according to the report.
Health-care companies also surged this year after Prime Minister Shinzo Abe pledged to reform the Pharmaceutical Affairs Law to facilitate biotechnology research, including exploring stem cells that can be reprogrammed for use in tissue engineering and regenerative medicine.
Shin Nippon Biomedical Laboratories Ltd. surged 315 percent this year for the second-biggest increase on the Tokyo Stock Exchange Mothers Index of smaller firms. CanBas Co., a maker of cancer treatments, has soared as much as 728 percent in the same span. Nipro Corp., a medical-equipment maker that owns 12 percent of ReproCell, surged 19 percent on May 27 after the listing was announced.
The TSE Mothers Index has plunged 41 percent since reaching its recent high on May 14, compared with a 14 percent decline on the Topix index. Shares have dropped amid a strengthening yen, disappointment with Abe’s growth strategy and concern global stimulus will be reduced. Mothers tumbled 12 percent yesterday, led by medical shares.
Small-capitalization stocks, especially in construction, real estate and health care, are set to recover ahead of major corporations, said Kyoichiro Shigemura, head of small- and mid-cap stocks at Nomura Holdings Inc. Government policies supporting venture enterprises are improving conditions for IPOs, including in biotechnology shares, he said.
“ReproCell’s business model is very sturdy,” said Gentoku Kiyokawa, Tokyo-based head of Japanese investment management at BNP Paribas Investment Partners, which oversees the equivalent of $647 billion. “All aspects make the company look like it could become a cash cow. Bio shares had been rising on optimism for Abe but that era has ended. Now it’s about choosing carefully which stocks are most able to gain profits.”