IPOs In Review: Biopharma Offerings Bounced Back In 2017 As Returns Rose
Executive Summary
With an average return of 33.2% in 2017, the number of biopharma IPOs that launched last year rose to 42 after falling to 30 in 2016 compared with 62 in 2015. Following a rough fourth quarter for biopharma stocks, will the IPO momentum continue in 2018?
Biopharmaceutical companies launched 42 initial public offerings in the US in 2017 versus 30 in 2016 as stock values rose. But biotechnology in general endured a rough fourth quarter, raising the question of whether returns will be high enough to support as many or more IPOs in 2018.
The average return for the biopharma IPO class of 2017 as of Dec. 29 – last year's final day of trading – was 33.2%, which was a near tripling of the 11.2% return at the end of 2016 for therapeutics firms that went public in the US that year. But biotech's outperformance versus other industries ended during the last few months of 2017, suggesting that the IPO boom could bust this year.
The big average return was helped by a few companies whose stock traded particularly well, including the antibody developer AnaptysBio Inc., which launched the first IPO of 2017 at $15 per share and closed up 571.5% at $100.72 at year's end, making it the biggest gainer by far last year. The San Diego-based company has multiple early- and mid-stage programs in the clinic for cancer as well as autoimmune and inflammatory diseases – including atopic dermatitis, psoriasis, asthma and food allergies – on its own and with partners.
Seventeen drug developers that closed first-time offerings in 2017 ended the year in negative territory and 23 provided IPO investors with positive returns as of Dec. 29 (see table below), including three companies with triple-digit returns. In addition to AnaptysBio, argenx SE was up 271.4% and UroGen Pharma Ltd. gained 186.2%.
However, two companies that priced offerings late in 2017 didn't list their shares on the US stock market before the end of the year.
Genprex, Inc. said on Oct. 13 that it priced 2.5m to 4.5m shares at $5 each and expected the offering on Nov. 6, but indicated in a Dec. 12 US Securities and Exchange Commission (SEC) filing that it planned to sell 1.3m shares at $5 to gross $6.5m. However, the novel cancer therapy developer also took out a $200,000 loan in December and its shares still are not trading on the stock market. (Also see "Finance Watch: NDA-Ready Impact Gets Commitment For Another $90m" - Scrip, 30 Oct, 2017.)
Meanwhile, Cue Biopharma Inc. priced 8.8m shares at $7.50 each on Dec. 27 and grossed $66.2m from the offering, but the Cambridge, Mass.-based company's stock didn't start trading on the Nasdaq until Jan. 2. The immunotherapy specialist is developing biologics that are designed to engage and modulate the activity of disease-specific T cells in cancer and autoimmune disorders. (Also see "What Could Come After CAR-T? Cue Is Betting On Selective Biologics" - Scrip, 12 Apr, 2017.)
Dollars Raised Rose
In addition to the number of biopharma offerings, the IPO market in 2017 bested 2016 in another important measure – therapeutics companies raised $4.2bn or $102.8m on average last year versus a total of $2bn or $67.4bn on average in the prior year. Drug developers raised a total of $5.4bn via IPOs in 2015 or $86.8m on average. (Also see "US IPOs In Review: Relatively Muted Market In 2016 To Continue In 2017" - Scrip, 30 Dec, 2016.)
But will the rising number of offerings and booming proceeds from IPOs continue in 2018? That's hard to say, given the fourth quarter 2017 decline in biotech stock values.
The Nasdaq Biotechnology Index (NBI) outperformed the broader Nasdaq and the Dow Jones Industrial Average through the third quarter, and advisors to the industry said they expected capital to flow into biopharma IPOs in 2018 as long as the sector continued to outperform other industries (see sidebar).
But things changed in the fourth quarter after big pharma and large biotech companies reported largely disappointing third quarter financial results, contributing to a 2.4% decline in the NBI between its Oct. 5 peak and the end of 2017. The index grew 21.1% for the year, but the Nasdaq gained 28.2% and the Dow Jones rose 25.1% between the end of 2016 and the end of 2017.
Even so, the biggest biopharma IPO of the year was completed by the neurodegeneration specialist Denali Therapeutics Inc. in December with $287.5m in gross proceeds. It was one of two first-time offerings by drug developers last month; the other was a $150m IPO completed by oral chemotherapy drug developer Odonate Therapeutics LLC. (Also see "Finance Watch: The Year's Biggest IPO And A Post-ASH Offering Splash" - Scrip, 20 Dec, 2017.)
Four New Names In The Queue
Armo BioSciences Inc., resTORbio Inc., Solid Biosciences LLC and Menlo Therapeutics Inc. filed paperwork with the SEC in December to note their intention to go public in the US.
Redwood City, Calif.-based Armo closed a $67m Series C-1 venture capital funding round at the end of August to fund clinical development of AM0010 – a pegylated form of interleukin-10 (IL-10) that's in development for lung and pancreatic cancers – and preclinical programs. (Also see "Finance Watch: Lilly Cuts 3,500 Jobs Globally To Drive Growth" - Scrip, 7 Sep, 2017.) The company said in its Dec. 29 SEC filing that it will raise up to $86.3m to fund late-stage trials for AM0010 and advance other programs.
The Boston-based resTORbio, which has the TORC1 inhibitor RTB101 in development for age-related indications, said on Dec. 5 – less than a week after it raised a $40m Series B venture round at the end of November – that it confidentially filed paperwork with the SEC to support an IPO. (Also see "resTORbio's Age-Related RTI Program Picks Up Further Funding" - Scrip, 30 Nov, 2017.) The company later revealed in a Dec. 29 filing that it intends to raise up to $85m, primarily for the development of RTB101.
Solid Biosciences of Cambridge, Mass., said in a Dec. 29 SEC filing that it will raise up to $100m to fund the company's mission of curing Duchenne muscular dystrophy (DMD). Lead product candidate SGT-001 is a gene transfer therapy that's being tested in a Phase I/II clinical trial. It is designed to restore functional dystrophin protein expression in patients’ muscles in an effort to slow or possibly halt progression of DMD independent of genetic mutation or the stage of the disease. The company raised a $42.5m Series B round in November 2015 and a $50m Series C round last April. (Also see "Finance Watch: Second Quarter Begins With Solid Base For Biopharma VC, Shaky Ground For Acorda" - Scrip, 10 Apr, 2017.)
Armo's Redwood City neighbor Menlo Therapeutics filed a registration statement with the SEC on Dec. 28 that said it will raise up to $97.8m to fund the development of serlopitant – a small molecule inhibitor of the neurokinin 1 receptor (NK1 R) that's in Phase II trials as a treatment for pruritus (itch) associated with dermatologic conditions and as a treatment for refractory chronic cough. The company raised a $50m Series C round in July. (Also see "Finance Watch VC Edition: Biopharma Venture Investment Rises In Second Quarter" - Scrip, 20 Jul, 2017.)
Other drug developers that registered IPOs with the SEC in 2017, but have yet to launch their offerings include dermatology-focused Sol-Gel Technologies Ltd. and Adial Pharmaceuticals Inc. (Also see "IPO Update: New Filings Feed Investor Fervor As Biopharma Stocks Rise" - Scrip, 8 Sep, 2017.)
2017 US IPO Performance Through Year End | ||||
Company | Gross Proceeds | IPO Price | Dec. 29 Closing Price | Return |
AnaptysBio Inc. (ANAB) | $86.3m | $15 | $100.72 | 571.5% |
Jounce Therapeutics Inc. (JNCE) | $117.1m | $16 | $12.75 | -20.3% |
ObsEva SA (OBSV) | $96.8m | $15 | $9.76 | -34.9% |
BeyondSpring Inc. (BYSI) | $54.3m | $20 | $29.08 | 45.4% |
Therapix Biosciences Ltd. (TRPX) | $13.8m | $6 | $5.34 | -11% |
Tocagen Inc. (TOCA) | $97.8m | $10 | $10.25 | 2.5% |
Verona Pharma PLC (VRNA) | $89.3m | $13.50 | $11.87 | -12.1% |
Zymeworks Inc. (ZYME) | $63.6m | $13 | $7.59 | -41.6% |
Ovid Therapeutics Inc. (OVID) | $75m | $15 | $9.87 | -34.2% |
UroGen Pharma Ltd. (URGN) | $66.9m | $13 | $37.21 | 186.2% |
$193.5m | $17 | $26.98 | 58.7% | |
G1 Therapeutics Inc. (GTHX) | $116.7m | $15 | $19.84 | 32.3% |
argenx NV (ARGX) | $114.7m | $17 | $63.14 | 271.4% |
Athenex Inc. (ATNX) | $75.9m | $11 | $15.90 | 44.5% |
Immuron Ltd. (IMRN) | $6.1m | $10 | $5.29 | -47.1% |
Dova Pharmaceuticals Inc. (DOVA) | $86.3m | $17 | $28.80 | 69.4% |
Mersana Therapeutics Inc. (MRSN) | $75m | $15 | $16.43 | 9.5% |
Aileron Therapeutics Inc. (ALRN) | $56.3m | $15 | $10.54 | -29.7% |
Avenue Therapeutics Inc. (ATXI) | $38m | $6 | $3.62 | -39.7% |
Akcea Therapeutics Inc. (AKCA) | $143.8m | $8 | $17.36 | 117% |
Kala Pharmaceuticals Inc. (KALA) | $103.5m | $15 | $18.49 | 23.3% |
$74.7m | $15 | $18.15 | 21% | |
$137.9m | $15 | $18.98 | 26.5% | |
Zealand Pharma AS (ZEAL) | $90m | $17.87 | $13.60 | -23.9% |
Krystal Biotech Inc. (KRYS) | $45.5m | $10 | $10.52 | 5.2% |
Zai Lab Ltd. (ZLAB) | $172.5m | $18 | $21.23 | 17.9% |
$138.8m | $17 | $22.67 | 33.4% | |
Nightstar Therapeutics Ltd. (NITE) | $86.3m | $14 | $13.12 | -6.3% |
NuCana BioMed Ltd. (NCNA) | $114m | $15 | $10.11 | -32.6% |
Rhythm Pharmaceuticals Inc. (RYTM) | $138m | $17 | $29.06 | 70.9% |
OptiNose Inc. (OPTN) | $138m | $16 | $18.90 | 18.1% |
Genprex Inc. (GNPX) | NA | $5* | NA | NA |
Ablynx NV (ABLX) | $230m | $17.50 | $24.99 | 42.8% |
Spero Therapeutics Inc. (SPRO) | $83.6m | $14 | $11.75 | -16.1% |
Allena Pharmaceuticals Inc. (ALNA) | $74.9m | $14 | $10.06 | -28.1% |
InflaRx GMBH (IFRX) | $106m | $15 | $20.95 | 39.7% |
Erytech Pharma SA (ERYP) | $144m** | $23.26 | $22.02 | -5.3% |
Arsanis Inc. (ASNS) | $66m** | $10 | $12.76 | 27.6% |
scPharmaceuticals Inc. (SCPH) | $102.1m | $14 | $12.09 | -13.6% |
Odonate Therapeutics Inc. (ODT) | $150m | $24 | $25 | 4.2% |
Denali Therapeutics Inc. (DNLI) | $287.5m | $18 | $15.64 | -13.1% |
Cue Biopharma Inc. (CUE) | $66.2m* | $7.50 | NA | NA |
Average Return: | 33.2% | |||
*Genprex launched an offering, but has not yet concluded the IPO or listed its shares on the US stock market. Cue launched its offering in 2017, but its stock didn't start trading until 2018. **Includes concurrent private placements: $20m for Arsanis and $19.1m for Erytech. | ||||