Flotations fail to bounce back

2022 saw just 19 initial public offerings of drug developers, the lowest total since 2012.

A torrid year for biopharma on the stock markets all but wiped out the prospect of going public. The IPO numbers for the full year show just how dire the situation is, with just three groups managing to get away in the fourth quarter – taking the 2022 total to 19.

This makes last year the worst for drug developer flotations since 2012, which saw 16 groups go public. And, in a further blow to the sector, one of the IPO success stories of last year, Third Harmonic, is already looking in danger of becoming a zombie after the December discontinuation of its lead candidate, THB001, on liver toxicity fears.

That some very early-stage players are still managing to float, and bank substantial sums, raises questions about whether investors have learnt much from the recent period of IPO excess. Prime Medicine, for example, which raised $175m in 2022's fourth-largest flotation in Evaluate Vantage's analysis. 

This analysis concerns IPOs of pure-play drug developers only; secondary listings are not included.

Prime is some way from human trials, but perhaps its backers could not resist the lure of the next big thing in gene editing, prime editing. Prime promises to address the drawbacks of gene therapy and other gene-editing methods such as Crispr/Cas9 and base editing.

Prime editing does not cause the double-stranded DNA breaks that have led to consternation over Crispr/Cas9; these double-stranded breaks are also not seen with base editing, another novel gene editing technique that can only make a limited number of point mutations. 

There are strong links between these next-gen methods: Prime and Beam Therapeutics, a major proponent of base editing, share a co-founder, David Liu, and the two companies are collaborators.

While base editing has been dubbed the “pencil” to Crispr/Cas9’s “scissors”, Prime describes its approach as a “word processor” that can find and replace genetic errors. The group now has to prove that this latest editing modality lives up to the hype, and must do so under the glare of the public spotlight.

Meanwhile, Acrivon, which is developing an asset originated by Array and Icos, raised a respectable sum, but unlike Prime it priced well below its initially-proposed range.

The chart below shows that this scenario is now the reality for many groups going public.

At least these companies managed to get away. IPOs from the likes of Alopexx and Intensity Therapeutics, slated for the fourth quarter, were postponed.

The question now is whether the bottom has been reached. A lot will depend on market sentiment, and things here do not look encouraging, with worries about war and inflation continuing to bite, alongside new fears about a Covid resurgence in China and the possibility of the emergence of new variants.

For biopharma in particular, the US Inflation Reduction Act looms large, with some respondents to a recent Evaluate Vantage survey contending that the sector was “uninvestable” unless these laws changed.

Still, at least one biotech IPO has already gone out in the first quarter: Coya Therapeutics’ offering formally closed on Tuesday, although the T regulatory cell (Treg) specialist raised just $15m.

More green shoots will be needed to provide hope that the IPO window might be about to reopen.

Fourth-quarter 2022 IPOs
Company Primary focus Amount raised Premium/(discount); float price to initial offer Share price change since float to end Q4
Prime Medicine Gene editing $175m 0% 9%
Acrivon Therapeutics Oncology targeting DDR pathways $99m -26% -8%
Lipella Pharmaceuticals Haemorrhagic cystitis $7m -4% -46%
Note: amount raised does not include over-allotments. Source: Evaluate Pharma.

Share This Article