Fate IPO flop raises fresh concerns about investors' appetite for biotech
A funny thing happened to Fate Therapeutics on its way to the hot biotech IPO market. Following fast on the heels on a pair of breakout IPOs, the offering ($FATE) flopped. And the setback is reigniting a debate over just how long the IPO market can continue to sizzle.
A month ago the La Jolla, CA-based Fate set its sights on selling 4.6 million shares at $14 to $16 a pop, worth up to $73.6 million. But yesterday the biotech went public at only $6 a share, raising $40 million on the sale of 6.7 million discounted shares.
Fate had been expected initially to debut a couple of weeks ago, leaving some observers to speculate over the cause of the delay. Is this a once-off rejection of a particular company or an indication that the IPO boom is losing its pop? While a lineup of companies like bluebird bio ($BLUE) and Agios ($AGIO) barreled into the market above the range, there have been a few that didn't catch the strong wind blowing a new generation of biotech companies into the market. Regado, for example, had to slash its price as well. Last week, though, Foundation Medicine ($FMI) and Ophthotech ($OPHT) both went public and raised a combined $273 million in a 24-hour stretch.
Fate launched 6 years ago, when its strategy for developing new therapies using adult stem cells attracted considerable attention. That buzz, though, has died down considerably. Its lead treatment, ProHema, is designed to rejuvenate the immune system, demonstrating some efficacy among patients with blood cancers.
Fate is the 38th biotech to go public this year as the IPO market embraced a large new class of drug developers. Collectively, the new IPOs have raised more than $2.8 billion.
MacroGenics, meanwhile, will see how the market feels about its prospects. The biotech ($MGNX) set a range of $14 to $16 for its IPO, which could raise up to $64 million if it can avoid the kind of reception earned by Fate.
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