Half of 2016 Biotech IPOs Positive At Mid-Year; 2015 Success Rate Sours
Executive Summary
It hasn't been easy for biopharmaceutical firms to go public in the US during 2016, but as of the end of June the scrutiny seems to be paying off – at least for investors in half of this year's first-half initial public offerings.
Eighteen therapeutics developers launched IPO in 2016, raising $1.2bn in total net proceeds and generating an average return of 10.8% as of June 30. Nine of the companies produced a positive return at mid-year and nine had a negative return versus their IPO stock price. But with only 18 IPOs so far in 2016 versus 34 biopharma first-time offerings at the mid-point of 2015, which raised a total of $2.9bn in net proceeds, investors clearly are responding to the now poor performance of companies that went public last year.
Comparing like with like, therapeutics firms that launched IPOs between January and June of 2015 had an average return of 15.9% versus their offering price as of June 30 last year. At that point, 18 of the 34 generated a positive return – slightly more than half. However, those same companies, minus one that's since been acquired, had an average return versus their IPO prices of -28.9% as of mid-2016. Only seven of the 33 that went public during the first half of 2015 were generating a positive return.
The Nasdaq Biotechnology Index (NBI) has fallen only 15.9% from the beginning of 2015 through June 30 of this year, which means that biotech stocks in general are performing better than biotech companies that went public during the past year and a half. But the broader Nasdaq stock index has gained 2.5% in the same time frame, so biotech overall is doing much worse than public companies in other technology and science-based industries.
The table below illustrates how biopharma IPOs launched during the first half of 2015 and the first half of 2016 have performed.
|
|
IPOs In 2015 (n=34) |
IPOs In 2016 (n=18) |
|
Average IPO Price |
$15.38 |
$12.20 |
|
Average Net Proceeds |
$85.8m |
$65.1m |
|
Average June 30, 2015 Stock Price |
$18.06 |
-- |
|
Average June 30, 2015 Return vs. IPO |
15.9% |
-- |
|
Number Of IPOs With A Positive Return |
18 |
-- |
|
Average June 30, 2016 Stock Price |
$11.64 |
$13.58 |
|
Average June 30, 2016 Return vs. IPO |
-28.9% |
10.8% |
|
Number Of IPOs With A Positive Return |
7 |
9 |
Despite their relatively poor performance, biotech companies continued to launch more US IPOs in 2016 than any other industry. The National Venture Capital Association (NVCA) reported recently that 12 venture-backed companies went public and raised $893.9m during the second quarter of this year – a 50% increase in the number of VC-backed IPOs versus the first quarter – with biotech leading the way.
"Biotech IPO activity continues to be the bright spot to an otherwise sleepy IPO market for venture-backed companies," NVCA President and CEO Bobby Franklin said in the organization's second quarter report on VC exits via IPOs and mergers and acquisitions.
Following a June IPO by the web-based phone and text message service provider Twilio, Franklin said, "We will be watching closely to see if this finally opens the doors for other venture-backed technology companies to float on the public markets. However, in the first half of 2016 we're well behind the pace of where we were at this time [in] the prior two years, and if we continue to see more private capital flow into later-stage companies in the entrepreneurial ecosystem, it's likely that the IPO slumber may continue in the second half of the year."
Venture Versus Public Financing: VC Deals Dominate
Indeed, even biopharma venture capital funding continues to remain at a high level despite a drop in IPO exits for VC firms. Big venture funding rounds are driving the quarterly biotech VC totals to record levels, but large investments are being made in both early-stage and clinical-stage therapeutics companies. (Also see "VC Roundup: Annexon, Mersana Benefit As Investors Favor Private Over Public Biotechs" - Scrip, 25 Jun, 2016.)
However, smaller venture financings are picking up as well. (Also see "VC Roundup: Three New Funds Close As Small, Early Financings Bounce Back" - Scrip, 3 Jun, 2016.) In a recent roundup of five biopharma VC financings, after Morphic Therapeutic's $51.5m Series A round, the next largest deal was a £12m Series A round for Storm Therapeutics. (Also see "VC Roundup: More Funds Raise Cash For Biotech; Morphic Closes $51.5m Series A" - Scrip, 4 Jul, 2016.)
Not that VC fundraising is a walk in the park, but it may be easier and less frustrating than raising capital in the public markets. Nine of the 18 biopharma companies that went public during the first half of 2016 took their offerings to market within an earlier proposed price range and the other nine priced their IPOs well below the preliminary range.
Perhaps that's why no biopharma firms have filed documents with the US Securities and Exchange Commission (SEC) to support a new IPO so far in July. Only two therapeutics developers filed S-1 registration statements with the SEC in June to begin the process of going public: Kadmon Corp. LLC and Syros Pharmaceuticals Inc., which priced its IPO on June 30 – just in time for inclusion in Scrip's roundup of first half 2016 IPO activity. (Also see "IPO Update: With No New Offerings, Kadmon Steals The Spotlight" - Scrip, 16 Jun, 2016.)
The table below outlines individual stock performance for this year's 18 companies that were brave enough to enter the tough market for public biopharma firms. (Also see "IPO Update: Haircuts Needed To Price Biotech Offerings" - Scrip, 4 Jun, 2016.) One theme for 2016's IPO market has held true all year: gene therapy, gene editing and immuno-oncology specialists are the best performing newly public therapeutics companies this year. (Also see "IPO Update: Three More Biotechs Squeeze Through The Window" - Scrip, 21 May, 2016.)
2016 IPO Performance As Of June 30, 2016
|
Company |
Net IPO Proceeds |
Proposed IPO Price Range |
Actual IPO Price |
June 30 Stock Price |
Return Since IPO |
|
Syros Pharmaceuticals Inc. (SYRS) |
$46.5m |
$14 to $16 |
$12.50 |
$18.15 |
45.2% |
|
Selecta Biosciences Inc. (SELB) |
$65.1m |
$14 to $16 |
$14 |
$13.99 |
-0.1% |
|
Clearside Biomedical Inc. (CLSD) |
$46.9m |
$14 to $16 |
$7 |
$7.01 |
+0.1% |
|
Moleculin Biotech Inc. (MBRX) |
$8.6m |
$5 to $6 |
$6 |
$6.63 |
10.5% |
|
Reata Pharmaceuticals Inc. (RETA) |
$56.3m |
$14 to $16 |
$11 |
$19.75 |
+79.5% |
|
Merus BV (MRUS) |
$51.2m |
$14 to $16 |
$10 |
$7.99 |
-20.1% |
|
PhaseRx Inc. (PZRX) |
$17.6m |
$5 to $7 |
$5 |
$4.18 |
-16.4% |
|
Oncobiologics Inc. (ONSIU) |
$32.5m |
$11 to $13 |
$6 |
$3.40 |
-43.3% |
|
$10.2m |
$13 to $15 reduced to $12 to $14 |
$12 |
$9.45 |
-21.3% |
|
|
Intellia Therapeutics Inc. (NTLA) |
$115.5m |
$16 to $18 |
$18 |
$21.35 |
+18.6% |
|
Aeglea Biotherapeutics Inc. (AGLE) |
$51m |
$16 to $18 |
$10 |
$4.86 |
-51.4% |
|
Corvus Pharmaceuticals Inc. (CRVS) |
$65.6m |
$15 to $17 |
$15 |
$14.26 |
-4.9% |
|
$102.5m |
$16.33 |
$13.50 |
$13.15 |
-2.6% |
|
|
Syndax Pharmaceuticals Inc. (SNDX) |
$53.7m |
$14 to $16 |
$12 |
$9.85 |
-17.9% |
|
$46.5m |
$12 to $14 |
$8 |
$12.13 |
+51.6% |
|
|
AveXis Inc. (AVXS) |
$88.4m |
$19 to $21 |
$20 |
$38.02 |
+90.1% |
|
Editas Medicine Inc. (EDIT) |
$101m |
$16 to $18 |
$16 |
$24.40 |
+52.5% |
|
BeiGene (Beijing) Co. Ltd. (BGNE) |
$147.3m |
$22 to $24 |
$24 |
$29.80 |
+24.2% |
|
Averages |
$65.1m |
$13 to $16 |
$12.20 |
$13.58 |
+10.8% |