Last year saw the most biotech IPO activity in over a decade, both in number of deals (37) and proceeds ($2.7B). Yet when the Q4 experienced a 50% decline in the number of these IPOs over the Q3, and especially when 6 deals postponed in November, it seemed the market for biotechs had lost steam. 2014 is proving otherwise, as the industry is once again dominating the IPO calendar.
Two biotechs, Dicerna ( DRNA ) and Celladon ( CLDN ), have priced upsized offerings this week, three are scheduled to price tonight, and eight more are on next week's calendar. With two more in mid-February, that's a total of fourteen biotechs in two weeks. Even in the busiest period last year, the maximum number of biotech offerings in a two-week period was merely six in September. Before that, there had not been six during a two-week period since August 2000. Altogether, biotechs represent 52% of all currently scheduled deals, compared with a historical average close to 9% of pricings. Just through mid-February, the estimated proceeds for all planned and priced IPOs this year are $943 million, more than the total seen in any year from 2008 to 2012.
Biotech stocks have generally performed extremely well recently, with Dicerna a standout example. Dicerna was up 207%, which is the highest first-day pop for a biotech in over ten years. Since 2001, only two IPOs, both Chinese Internet companies (Baidu BIDU and Youku YOKU), have ended the first day up more than 140%. While the other two biotechs to go public this year have performed more modestly (up 11% on average), the average 2013 biotech was up 72%. Also impressively, the average biotech to go public in 2011 to 2012 has gained over 250%.
Biotech Performance Since 2011
Time of Pricing
IPO Count
AverageDeal Size
Average MarketCap at IPO
Average First-Day Return
TotalReturn*
4Q13
7
$72
$256
28%
108%
3Q13
14
$75
$320
22%
38%
1H13
37
$74
$293
20%
87%
2011 - 2012
17
$71
$269
13%
268%
The biotech bonanza is due to the emergence of several favorable conditions. First, the actual bioscience has made rapid advancements, evidenced by two gene therapy IPOs. Next, the FDA has put greater emphasis on accelerating the approval of life-saving drugs, so they do not stand by in interminable review. Investors have also been very receptive in their appetite for biotechs, further driving these IPOs just as the companies need critical financing. Finally, financial statements must be re-audited if an IPO occurs after February 14th. The biotechs are then eager to make it through this window of opportunity as science, regulation, and capital converge.
Particularly unusual is the number of pain-relief companies that have launched - appropriate for investors after last week's market dive. In fact, just one of the fifty-four biotechs over the past three years were focused on novel pain treatments, but the next two weeks will see four. Trevena is developing a potentially more powerful replacement for morphine, while Cara ( CARA ) and Egalet ( EGLT ) are designing less addictive treatments.
Pain Relief IPOs on the Calendar
Company
Ticker
Description
Offer Date
Stage ofLead Candidate
Deal Size
Cara
CARA
Novel opioid pain medication
1/31
Phase 3
$60
Trevena
TRVN
Pain & acute heart failure
1/31
Phase 2a complete
$60
Egalet
EGLT
Abuse-deterrent oral pain meds
2/7
Phase 2/3
$42
Flexion
FLXN
Injectable pain therapies for osteoarthritis
2/12
Phase 2b complete
$65
The IPO calendar also calls for a breakout of IPOs that target rare diseases. Rare disease biotech IPOs were very successful in 2013: Acceleron ( XLRN ), Agios (AGIO), Epizyme (EPZM), and PTC (PTCT) are all up more than 50%. Investor interest in the space seems to remain very high, as Dicerna's record trading today and Ultragenyx's increased price range ($19-$20 from $14-$17) illustrate.
Rare Disease IPOs on the Calendar
Company
Ticker
Description
Offer Date
Stage ofLead Candidate
Deal Size
Dicerna
DRNA
RNAi treatments of liver disease & cancer
1/30*
Preclinical
$90
Ultragenyx
RARE
Metabolic genetic diseases
1/31
Phase 2/3
$94
Auspex
ASPX
Treatments for orphan diseases
2/5
Phase 3
$61
uniQure
QURE
Gene therapies for orphan diseases
2/5
Phase 3 complete
$64
Consistent with the first two groups, the remaining deals on the calendar are generally in a late stage of development and are looking to raise less than $75 million. Genocea (GNCA) has developed vaccines that, by activating T cell responses, could be used to treat herpes and protect against pneumonia. Argos is relaunching its IPO after postponing a February 2012 offering. It is developing immunotherapies for cancer and HIV.
Other Biotech IPOs on the Calendar
Company
Ticker
Description
Offer Date
Stage ofLead Candidate
Deal Size
Celladon
CLDN
Gene therapy for systolic heart failure
1/30*
Phase 2a complete
$44
Genocea
GNCA
Vaccines for infectious diseases
2/5
Phase 1/2a
$72
Eleven Biotherapeutics
EBIO
Protein therapeutics for eye diseases
2/6
Phase 2b complete
$60
Revance Therapeutics
RVNC
Enhanced Botox formulations
2/6
Phase 3
$75
Argos
ARGS
Immunotherapy for cancer & HIV
2/7
Phase 3
$60
NephroGenex
NRX
Treatments for kidney disease
2/7
Phase 3
$40
The torrent of biotech deals on the calendar will test investor appetite for these high-risk companies. In addition to the biotech IPOs that launched, six more have filed this month, meaning that more than one in five companies in the IPO pipeline (22 out of 107) is a biotech. It is impossible to say whether the rest of 2014 will sustain these levels, but one thing is certain: like a shot in the arm, biotechs are back!
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
