Another sign of the deflating biotech bubble in early 2016: the number of pulled initial public offerings on the key Nasdaq exchange is running neck and neck with the ones that have managed to get away on western exchanges.
April in particular has been a rough month for companies looking to access the publicly traded markets, with four companies having yanked their IPOs in a five-day span. Unfavourable market conditions are reasons frequently cited for withdrawal, even in the good times, but given the 30% slump in biotechnology shares since a peak last July, in this instance that claim is probably not off the mark (see tables below).
One bad week
Had all seven pulled IPOs made it to market, it would have nearly doubled the tally for the year: $507m of equity has been kept from public trading. The total for Q1 was $569m, which, while disappointing when stacked against 2015’s $783m or 2014’s incredible $2.1bn, is not the worst the sector has seen (Audacity pays off for the few newly public biotechs, April 12, 2016).
|Withdrawn IPOs to date in 2016 (all Nasdaq)|
|18 April 2016||Inpellis||20|
|15 April 2016||BioCardia||50|
|14 April 2016||GenSight||100|
|13 April 2016||Bavarian Nordic||86|
|24 March 2016||Klox Technologies||82|
|04 March 2016||PLx Pharma||83|
|08 February 2016||Apellis Pharmaceuticals||86|
A similar period, from January 1 through April 19, 2015, saw five withdrawals, representing a total of $363m, though two of those, Syndax Pharmaceuticals and Advanced Accelerator Applications, managed to float later. The same period in 2014 saw only two IPOs pulled back – and one of those was Aptalis Holdings, which was acquired by Forest Laboratories before Nasdaq investors could begin trading $500m-worth of shares.
There should be some optimism that one of the retracted Nasdaq IPOs of 2016, that of Bavarian Nordic, could see a return in the near future. After all, it is already an $1.2bn company traded on the Copenhagen exchange, with a steady revenue stream selling smallpox vaccines to the US government – its US listing was undoubtedly aimed at tapping the more specialised American biotech investors.
Bavarian completed a DKr665m ($102m) private placement following its Nasdaq misfortune, so it has less incentive to brave the stormy IPO waters today. Success with either its therapeutic prostate cancer vaccine or preventive Ebola virus vaccine could provide an opening to return to US investors, however.
How to succeed in biotech
Looking at the results from the first quarter’s successful listers, it may be possible to conclude that while the market is indeed unfavourable, there are opportunities for companies in innovative areas that have built a solid record of financing. Corvus, BeiGene and Editas Medicine, to name three, were active in 2015 venture capital fundraisings, amassing cash in the $100m range.
|Q1 biotech IPOs on Western exchanges (all Nasdaq unless stated)|
|Company||Amount raised ($m)||Offering price||Discount/ premium||2016 Q1 chg since float|
|Shield Therapeutics (Aim listing)||47||£1.50||-||17%|
The performance of the early 2016 class of IPOs bears out the hypothesis that the strong will survive: all but Corvus finished March in the green.
A return to the heady days of the 2014 IPO scene should not be expected as long as investors remain wary of biotech – and if the history of the 2000-2002 boom and bust is any guide, valuations still have a long way to fall. Fewer floats should be anticipated in the near future, and by the same token, fewer IPOs might be withdrawn as later-stage private groups take a hint and chase currency outside of the public exchanges.