Biotech bull market boosts IPO bumps
It is a good time to be a venture investor in a biopharma company looking to float on the public exchanges.
These financiers have a decent chance of seeing their investments double in value or more at IPO, as happened with Catabasis Pharmaceuticals and Adaptimmune, to name just two. That many of these huge bump-ups were achieved while in phase II, pharma’s most failure-prone stage, is testament to investors’ hunger for risk (see tables below).
The double-the-valuation club is rather a large one in the second quarter of 2015, so generalisations are difficult to make other than that most of these are at that mid-stage of development that proved vulnerable before the biotech bull market took off three years ago.
Being in rare diseases and oncology may be a benefit, as Catabasis and Adaptimmune have proven, but a pain specialist in KemPharm and an anti-infectives group in Seres Therapeutics also got away with triple-digit boosts in their valuation.
This analysis of SEC data compiled by EvaluatePharma compares the weighted-average price of VC rounds with the IPO offering price to determine the increase in valuation resulting from a public listing.
Rare and more common
Notwithstanding Axovant, the Alzheimer’s disease specialist that skewed the quarter as it spun out of privately held Roivant Sciences and thus had no measurable metrics, the sector’s top gain in valuation resulting in a public float came from Catabasis.
| Amount Raised by IPO ($m) | Average Share Price pre-IPO ($) | IPO Offering Price ($) | % bump up at IPO | SP change since IPO | Most advanced project | |
| Company | ||||||
| Seres Therapeutics | 133.74 | 4.42 | 18 | 307% | 131% | Phase II |
| Catabasis Pharmaceuticals | 60 | 0.76 | 12 | 1479% | 2% | Phase II |
| Ritter Pharmaceuticals | 24 | 4.52 | 5 | 11% | -11% | Phase II |
| Nivalis Therapeutics | 77 | 15.47 | 14 | -10% | 8% | Phase II |
| Collegium Pharmaceutical | 69.6 | 8.09 | 12 | 48% | 49% | Marketed |
| aTyr Pharma | 75.04 | 10.02 | 14 | 40% | 32% | Phase II |
| CoLucid Pharmaceuticals | 55 | 9.1 | 10 | 10% | -11% | Phase II |
| Blueprint Medicines | 146.63 | 6.53 | 18 | 176% | 47% | Pre-Clinical |
| KemPharm | 56 | 3.9 | 11 | 182% | 67% | Phase III |
| Aduro BioTech | 119 | 2.7 | 17 | 530% | 78% | Phase II |
| Cidara Therapeutics | 76.8 | 8.69 | 16 | 84% | -12% | Pre-Clinical |
| Carbylan Therapeutics | 65 | 4.38 | 5 | 14% | 43% | Phase III |
| Adaptimmune | 191.25 | 2.27 | 17 | 649% | 61% | Phase II |
| * Source: EvaluatePharma, SEC filings. | ||||||
That company has as its core strategy a linker technology to combine two bioactive molecules into a single asset. It has a Duchenne muscular dystrophy (DMD) project, CAT-1004, that has gained orphan drug and fast track designation from the FDA. This shows that a focus on rare diseases and that particularly disabling disorder can earn a company a lot of investor devotion. However, devotion can also quickly dissipate in the event of clinical stumbles, as Sarepta Therapeutics has learned.
Adaptimmune, with the second-biggest bump, has the immuno-oncology double play on its side as it crossed the Atlantic to complete its Nasdaq float in May. The same is true for Aduro BioTech, which is attempting to show some benefit in two of the most difficult-to-treat diseases, mesothelioma and pancreatic cancer.
Blueprint Medicines and Cidara Therapeutics added to the tally of companies without pre-clinical assets that have persuasive enough stories to earn themselves a listing via IPO. They also fit with trends of attractive disease areas, as the former is in oncology and the latter in anti-infectives, a space that has been stimulated by the existence of the FDA’s Qualified Infectious Diseases Programme.
Going up
As if to confirm these trends, the phase II floats in Q2 are above the historical average seen from 2013 through to the end of Q1, which was $81m (No clinical assets? No problem, May 8, 2015). There was a slump for phase III companies, although given that only two companies were represented in Q2 that is a small sample.
| Average amount Raised by IPO ($m) | Average Share Price pre-IPO ($) | Average IPO Offering Price ($) | Average % bump up at IPO | Average SP change since IPO | No. of companies in analysis | |
| All IPOs | 88.39 | 6.22 | 13.00 | 271% | 37% | 13 |
| IPOs that raised $100m+ | 147.65 | 3.98 | 17.50 | 415% | 79% | 4 |
| IPOs that raised $80m+ | 147.65 | 3.98 | 17.50 | 415% | 79% | 4 |
| IPOs that raised $40m+ | 93.75 | 6.36 | 12.64 | 292% | 41% | 12 |
| Phase III companies | 60.50 | 4.14 | 8.00 | 98% | 55% | 2 |
| Phase II companies | 91.88 | 6.10 | 13.29 | 377% | 36% | 8 |
| Phase II + III companies | 85.60 | 5.75 | 12.30 | 321% | 40% | 10 |
| Pre-clinical companies | 88.74 | 7.61 | 17.00 | 130% | 17% | 2 |
| * Source: EvaluatePharma, SEC filings. | ||||||
The trend identified after Q1 – that of pre-clinical companies getting away and seeing a decent jump in valuation – has been sustained in Q2, although Cidara missed out on a doubling with its 84% increase. Still, in dollar terms the two entries from Q2 should help the total tick up by a little bit from the historical average of $87m. The same should be true across IPOs, which stood at a historical average of $81m through the end of Q1.
History also tells us that Q2 usually produces strong IPO numbers, coming ahead of the summer business lull. How Q3 numbers could be affected by the additional uncertainty in the Eurozone and China will be interesting to watch.
To contact the writer of this story email Jonathan Gardner or Edwin Elmhirst in London at [email protected] or follow @ByJonGardner or @EPVantage on Twitter
