The most likely indicator of whether biotech's Wall Street hot streak can last is whether investors are getting good returns on all these drug developer IPOs. And so far, the beneficiaries of 2014's boomlet are coming through.
In total, the 18 life sciences companies that have gone public this year are up 34.7% above their initial pricings. Leading the way are Dicerna ($DRNA), which is trading at roughly 260% of its $15 debut, and Ultragenyx ($RARE), whose share value has more than doubled to about $44. Orphan drug outfit Auspex ($ASPX) is up about 100% on its $12 pricing, while Revance Therapeutics ($RVNC) is trading roughly 67% above its debut and early entrant GlycoMimetics ($GLYC) has risen 30%.
Furthermore, the class of 2014 has been largely devoid of duds. A few outfits priced below their ranges, but since hitting the Street, most have stayed at least about flat, with only Eagle Pharmaceuticals ($EGRX) falling more than 10%.
And while those high returns will likely help ensure that investors are willing to listen to pitches from biotechs, the more than $1 billion raised since Jan. 1 is sure to convince more companies to line up for IPOs. In the past two weeks alone, 13 biotechs have gone public in exchange for about $772 million, and analysts expect a total of about 25 companies to make a go at going public in the first quarter.
Whether all the excitement can endure much longer is the subject of some debate, and the word "bubble" has been floating around as the industry continues its sprint for the public markets. Investors are fickle, and it may take just one colossal failure to ruin the party for everyone--in 2013, the late-year swoons of Sarepta ($SRPT), Amarin ($AMRN) and Ariad ($ARIA) seemed to spook investors away from biotechs, leading to a brief IPO drought in an otherwise historic year.
But in the meantime, drug developers remain the toast of Wall Street, and as long as their shares are soaring, that's unlikely to change.