Where is the IPO class of 2014-15 now?

A golden age for biotech flotations yielded some spectacular blow-ups, but also saw several groups reward investors with premium-priced takeovers.

The biotech boom years of 2014 and 2015 were happy days for private groups seeking to access capital on stock exchanges, with $11bn raised in 148 initial public offerings. With as much as four years of perspective, it is worth taking a look at how wise it was for investors to have backed some of the biggest floats in those frothy times.

Of the 10 biggest IPOs in those two years, the rate of success to failure is about even, with 10 having suffered losses in valuation, sometimes disastrously so thanks to clinical failures. Nevertheless, the average share price appreciation in both annual cohorts is positive, and strongly so, thanks in part to acquisitions of such sought-after assets as Kite Pharma and Juno Therapeutics, and in part to continued progress shown by companies that remain independent.

Today's collapse of VTV Therapeutics, a 2015 IPO, shows the risk of a publicly traded company being heavily reliant on a single, risky clinical asset, as is the case with many biotechs spotlighted here. Although VTV did not make the top 10 IPOs of that year, its share price decline is on a par with the failures on these two lists.

Insight into winners and losers

Many early investors made their money and exited long before these companies reached the catalysts that sent them either to lofty heights or into the biotech graveyard. Still, their performance should give clues as to the general outlines of companies that on average can yield profits for investors over a four-year time horizon.

The class of 2014
Company IPO size ($m) Change since float* Notes
Circassia 332 -71% Cat allergy vaccine Toleromune failed Jun 2016
Juno Therapeutics 304 263% Acquired by Celgene Jan 2018
Forward Pharma 235 -89% Lost challenges to Biogen's IP for Tecfidera 2018
Fibrogen 168 157% Has advanced anaemia drug roxadustat to pivotal trials
Bellicum 161 -66% Clinical hold for T cell therapy BPX-501 Jan 2018
Kite Pharma 128 959% Acquired by Gilead Sciences in Aug 2017
Versartis 126 -92% Growth hormone project somavaratan failed Sep 2017
ZS Pharma 123 400% Acquired by Astrazeneca Nov 2015
Ultragenyx 121 141% Cryvista approved in Europe Feb 2018
Dermira 113 -55% Acne project DRM01 failed phase III Mar 2018
Average 155%
*Share price change from float to close April 9, 2018; Juno, Kite and ZS from float to acquisition.

Using share price performance as a metric, ZS Pharma must be mentioned as a success, no matter how much difficulty its buyer, Astrazeneca, has subsequently had with the lead asset involved, ZS-9.

On the other hand, it did not take an acquisition to cause Blueprint Medicines share prices to quintuple in price – the company went from preclinical to pivotal trials in just three years and looks like it might have in avapritinib an asset that could take on Novartis’s Rydapt. M&A expectations are no doubt driving the group’s valuation, but as long as avapritinib continues to perform Blueprint could turn out looking a lot like Kite.

Biggest not best

But then there are the disasters. Circassia and Axovant were the biggest biotech IPOs in their respective years, and have respectively lost 71% and 92% of their value thanks to lead projects that flopped. Joining Axovant in holding the wooden spoon in this cohort is Versartis, which tried and failed to show that the long-acting growth hormone somavaratan was at least the equal of daily Genotropin.

Class of 2015
Company  Amount raised ($m) Change since float* Notes
Axovant  315 -92% Intepirdine failed Sep 2017
Nantkwest  208 -86% Trails behind major immuno-oncology players
Adaptimmune  191 -38% Patient deaths in T-cell receptor therapy trials
Spark Therapeutics  161 206% Launched first US bona fide gene therapy in 2017, but haemophilia A project has struggled
Aimmune Therapeutics  160 89% Succeeded in phase III peanut allergy trial 2018
Blueprint Medicines  147 405% Advanced oncology agent avapritinib into phase III trials 2018
Regenxbio  139 45% Licensee Avexis acquired by Novartis Apr 2018, increasing the fees due under original agreement
Pronai Therapeutics  138 -88% Lead asset PNT2258 failed at interim analysis in Jun 2016. Renamed Sierra Oncology in Jan 2017
Seres Therapeutics  134 -61% SER-109 failed in Clostridium difficile treatment Jul 2016
Global Blood Therapeutics  120 119% Sickle cell disease project voxelotor won US breakthrough therapy designation Jan 2018
Average 50%
*Share price change from float to close April 9, 2018.

It is also fair to say that 11 of these 20 companies have reached clear catalysts that have determined their success or lack thereof. But for Blueprint, along with groups like Global Blood Therapeutics and Fibrogen, to name just three on the positive side of the ledger, the final act has yet to be written as phase III trials of their candidates are still ongoing.

So, given the obvious hit-and-miss nature of investing in big biotech IPOs, what is the key to success? If one were to buy into every one of the top 10 IPOs in these two years the average return would be pretty attractive, with the caveats that one must withstand heavy losses on some investments, and that the top 10 will only be known retrospectively.

However, a good rule of thumb in these two years at the peak of the biotech frenzy was that it took an IPO of more than $120m to make the 10 biggest of the year. Look to companies in that range to find a cohort that has, on average, outperformed biotech in general over this time horizon.

To contact the writer of this story email Jonathan Gardner in Virginia at jonathang-us@epvantage.com or follow @ByJonGardner on Twitter

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