Fast times in biotech push IPO count to new highs
The red-hot biotech IPO scene continued its tear through the close of 2013, with the 20 floats in the first six months exceeded by the 24 public listings achieved in the second half of the year.
A stellar December helped push the total to levels not seen in years – trebling 2012’s tally – as record-breaking biotech indices provided ample incentive to tap public markets. The good times will not last forever, so 2013 was the best time in years for venture capitalists to strike and draw ever closer to an exit.
The impressive part of the 2013 IPO class – though not necessarily surprising given the rise in various biotech indices – is its performance since floating (see table). On average, shares have risen 59% in this cohort, a grouping that includes 15 companies that have been freely traded for less than four months.
Image: 401K 2012 flickr
It is true that the 2013 class on average floated at a 13% discount from their proposed range. But compared with 2011, when every biotech could expect to take a significant “haircut”, 2013 looks pretty good indeed. Agios Pharmaceuticals, Onconova Therapeutics, OncoMed Pharmaceuticals, and Bluebird Bio are four that were able to get away with double-digit premiums. It does not hurt that those four companies work in the sought-after fields of oncology or orphan diseases.
Talking of oncology, it was another company in this space that walked away with the second biggest float of the year. Intrexon Corporation sold $160m of shares to premier on the New York Stock Exchange in August, and has seen its value grow by 49% through the end of the year.
The biggest jackpot, $167m, was won by Ophthotech Corporation, a company working in the no less desirable field of ophthalmology. Its shares rose 47% from its September float through the end of 2013.
These huge second-half floats did little to lift the averages for the year, even coming at a premium, as they did. The average IPO in 2013 raised $67m, exactly the same as the average for the first six months of 2013; at the end of the first half, the average discount was 14%, compared with the half year's 13% (Floats rise out of the biotech bubble at last, July 10, 2013).
(click thumbnail for full table)
Flops and not
If you were a well-connected investor able to buy into a biotech at the IPO price, the odds were that you did pretty well. Just nine newly public biotechs saw their value contract by the year’s end. Prosensa led the way with a decline of 64% on the back of disappointing news from its lead project, drisaspersen (Prosensa's phase III flop could have broad implications for exon-skipping, September 20, 2013).
Netherlands-based, US-listed Prosensa is rather unique in this table in having had a clear late-stage catalyst. Many of the other companies are early-stage, with a stock price theoretically based on deal-making acumen or potential acquisition value; thus in the biotech bull market it is not surprising that up was the prevailing direction.
Insys Therapeutics’ 384% rise had to be the toast of Nasdaq biotech investors, although from a steep 53% discount the rise is a little less impressive; the pain specialist got away two years later than planned. Acceleron Pharma rising 164% after floating at a 7% premium can probably be considered at least an equally impressive achievement.
Meanwhile, the biotech enthusiasm that has infected US exchanges has not spread to their overseas counterparts, as just three European and one Australian group managed to premiere this year. Indeed, companies like Prosensa and UK-based GW Pharmaceuticals found US investors more friendly and chose to float on Nasdaq.
The gold rush for biotech IPOs did not show any sign of abating through a series of market wobbles in 2013, and it is hard to see an obvious end in 2014. In the absence of macroeconomic shifts, the end to the biotech bull market might come only when investors believe they have made enough profit and shift their money to other sectors. Any company aspiring to go public should want to float before that window-closing eventuality.