This year has been a strong one for biotech initial public offerings (IPO). According to the Wall Street Journal, as of mid-October, 55 biotech companies had raised $5.75 billion.
This year has been a strong one for biotech initial public offerings (IPO). In mid-September, there were 58, with the first listed on the BioPharmCatalyst database being Menlo Therapeutics on January 25, 2018. According to the Wall Street Journal, as of mid-October, 55 biotech companies had raised $5.75 billion. Obviously, the numbers depend somewhat on which database you check, but what is loud and clear is that 2018 has been a big one for biotech IPOs.
Several of this year’s biotech IPOs have been unusually large. Allogene Therapeutics, which was founded in 2017, raised $373 million in its IPO this year.
Rubius Therapeutics raised $277 million in its July IPO.
Homology Medicines raised $166 million in a March IPO and currently has a market value of more than $700 million.
Others include Tricida, which raised $22.3 million in June, Germany-based MorphoSys AG, which raised $207.8 million in April, Kiniksa Pharmaceuticals, which raised $152.6 million in May, and UK-based Autolus, which raised $150 million in June.
One reason it’s been such a big year for biotech IPOs is low interest rates and, Bloomberg wrote in September, “a hunt for higher returns by institutional investors.”
The Wall Street Journal suggests that accelerated approval modalities by the Food and Drug Administration (FDA) may be a factor. Perhaps investors see that as a possibility that potential drugs will make it to the market faster.
Biotech investment is different than, say, tech investment. One of the primary business models for biotech startups is getting to Phase I or Phase II clinical trials and either partnering with a large pharmaceutical company or being acquired by one. A typical strategy is raising funds to launch with a Series A, which will take the company through founding and preclinical trials. Another round, often Series B or later, will give it funds to take into early-stage trials, Phase I to get proof-of-concept, and sometimes into Phase II. Phase III trials are significantly more expensive due to their size and scope, which is why they often either team up with larger companies or try to raise even more money through an IPO.
For the last several years, BioSpace has selected a list of the top 20 Biotech Companies to watch, based on a number of metrics, including funds raised and innovation. A look at some of the top companies from these lists shows us a lot about IPOs.
Juno Therapeutics. Ranked number one on the NextGenBio Class of 2015, Juno’s initial Series A investment was $120 million. It held a secondary Series round in April 2014 with $176 million in fully committed funds. By the time it wrapped Series B, it had brought in more than $300 million in less than 12 months.
In December 2014, the company’s IPO climbed 60 percent at its debut, closing at $35 per share, raising $265 million from the offering. Its market valuation hit $2.7 billion in the opening day of trading. In January 2018, Celgene scooped up Juno for $9 billion.
MyoKardia. Ranked number two the same year as Juno topped the list, the company had raised $52 million in three rounds from a single investor, then brought in another $10 million in August 2014. Prior to its IPO, it raised about $75 million in venture funding. It launched an IPO in October 2015, pricing 5,437,500 shares at $10 per share for about $50.5 million. It had hoped to raise $91.6 million with the IPO.
Corvus Pharmaceuticals. Corvus ranked top of the list for 2016. It had raised $33.5 million in Series A, then another $75 million in Series B. In 2016 it priced its IPO at $15 per share, the lowest range it could. It raised $71 million rather than the $80 million it was aiming for.
CRISPR Therapeutics. Hitting number three on 2016’s list, CRISPR completed a $35 million Series A financing and an $89 million Series A and B round. In October 2016, CRISPR raised $56 million with its IPO. CRISPR was the third company focused on using CRISPR gene editing that year to file an IPO, following Editas Medicine, which raised more than $100 million in February and Intellia Therapeutics, which also raised more than $100 million. CRISPR Therapeutics’ take was about 25 percent lower than its target. (Editas ranked number 15 on BioSpace’s 2015 list.)
Denali Therapeutics. Hitting number one on the BioSpace Top 20 Life Science Startups to Watch in 2017, the company has always been a big money-raiser. It raised $347 million in venture capital funding in two rounds from five investors. Founded in May 2015 by three former Genentech researchers, in December 2017 its IPO raised $250 million shares priced at $18.
At the time, BioSpace wrote, “With the raise, the company’s market valuation is currently $1.7 billion. Not bad for a company that doesn’t have a product for sale and in the case of a biotech, is only just entering the clinic.”
It’s also worth noting that in 2017, the Denali IPO was the 40thbiotech IPO of the year compared to only 27 in 2016.
Although this year’s boom appears to be slowing, that’s not completely unexpected. Hartaj Singh, an analyst with Oppenheimer, told Bloomberg in September, “We’ve already had a really good 12-month period. They don’t tend to be much longer than that.”
