This year will not go down as a classic for biotech IPOs; in fact, it’s been pretty dismal, with a report by Renaissance Capital out in the summer showing that almost all of the biotech IPOs that priced since the first quarter have broken issue, and were trading below their offer price.
The report found that on top of this, IPOs are also leaning more than ever on existing investors buying shares in the IPO.
The average portion going to insider buying is 40% for 2016 biotech IPOs; that's double the roughly 20%-per-deal average for each of the last two years.
And things didn't get too much better for the rest of the year: In fact, in the bigger scale of things, Bloomberg data show that 2016 was the worst year for any and all IPOs since the recession, raising the fewest proceeds since 2009.
As a snapshot of the problem that some have faced, during a one-week period in April, Denmark’s Bavarian Nordic and the Paris-based biotech GenSight (although it later managed to get its off), alongside regenerative, California-based biotech BioCardia, all dropped or delayed their IPOs due to the ongoing headwinds.
It’s not all been doom and gloom in biotech, however, and some companies have had some stronger showings, but it appears to come down to the therapy area.
One that has consistently seen success this year has been those early-stage biotechs working on CRISPR-Cas9, with three: Editas, Intellia and most recently CRISPR Therapeutics, all getting their IPOs off this year.
Although all of them struggled in their first few weeks and have been hit with volatility, the fact they got their IPOs off where many others fell to the wayside perhaps shows that even in a tough year, excitement over new science can counteract a tough environment.
But some biotech CEOs are starting to question evermore the very value of going public. In fact, a number of private biotech chiefs have told FierceBiotech this year that IPOs do little more than strip value away from a company, and make it much harder to work on the hardcore science when shareholders are breathing down their necks.
Many that still seek an IPO are also playing the waiting game to go public, but much depends on when the window opens wide again for this market. Venture capital, on the other hand, has had a strong year in 2016.
Next year, we may see more Big Pharma/Biotech partner deals, or companies seeking to create an independent, private path. With a Donald Trump presidency and the potential opening up of billions of dollars of locked-down cash from overseas, there is also a belief that biotech M&A could ramp up again in 2017, which may make IPOs less attractive if private companies are holding out for a merger deal.
But the New York Stock Exchange is making a push for more deals, with its president Tom Farley saying this month that he is doing more pitching and planning for 2017 IPOs than at any point this year.