Strong Demand and Performance for Life Sciences IPOs Continues in July

Strong Demand and Performance for Life Sciences IPOs Continues in July

Burrill & Company reports biggest week for new issues in 13 years as sector's offerings outpace IPOs in all other sectors.

SAN FRANCISCO—AUGUST 1, 2013—The life sciences IPO market continued to heat up in July as six life sciences companies completed IPOs in July with five of those new issues debuting in a single week, the busiest week for biotech IPOs in more than 13 years, according to Burrill & Company.

The last time so many companies completed initial public offerings in the sector in a single week was the week of February 7, 2000, when seven life sciences companies completed IPOs.

In all, 29 life sciences companies raised a total of $5 billion on U.S. exchanges through the first seven months of 2013. That compares to 11 companies raising $771 million during the same period a year ago. Even excluding the $2.6 billion IPO of Pfizer's animal health spin-out Zoetis, the sector is seeing its most robust period for IPOs since 2000. A total of 24 life sciences companies are in registration in the United States with four companies added to the IPO queue in July. The number does not include companies that may have filed confidentially under the JOBS Act.

"For a long time, general investors were reticent to invest in the biotech sector because of uncertainties overhanging the industry," says G. Steven Burrill, CEO of Burrill & Company, a global financial services firm focused exclusively on the life sciences. "Now, driven by the strong performance of the sector as a result of clinical and market successes, investors are embracing biotech or risking underperforming the market."

The IPO activity in the sector reflects a significant shift in attitude among investors, driven in part by large pharmaceutical companies chasing rare disease and cancer assets. Heading into this year, companies seeking to go public needed revenue or products ready to enter the marketplace to garner investor interest. Today, early-stage cancer and rare disease therapeutics companies are now finding a receptive environment, even when they are years away from having products or sales.

A Burrill & Company analysis of all IPOs on U.S. markets in 2013 based on data from S&P Capital IQ shows life sciences issues outperformed IPOs in all other sectors through the end of July with an average return of 40.5 percent. That was driven by four rare disease therapeutics companies that rose an average of 72 percent and eight cancer therapeutics companies that jumped 70 percent during the period. Interest in rare disease and cancer therapeutics companies has been ignited by Roche's pursuit of the rare disease therapeutics company Alexion Pharmaceuticals and Onyx Pharmaceuticals rejection of an unsolicited $10 billion bid from Amgen. It is now being pursued by several Big Pharmas.

The information technology sector is the next best performing IPO group with an average increase of 31 percent. Stemline Therapeutics, developing therapies that target cancer stem cells, is the top performer with a 181.4 percent rise from its IPO price. A total of 22 life sciences issues are up from their IPO price, while seven ended July below their initial offering price.

Overall, the biotech sector continues to outperform the broader market. The Burrill Select Index soared 46.2 percent through the end of July. During the same period, the Dow Jones Industrial Average gained 18.3, the S&P 500 jumped 18.2 percent, and the Nasdaq Composite Index rose 20.1 percent.

July also proved to be a big month for M&A activity as $15.5 billion in deals were announced, with $13.2 billion of that coming in the final week. Perrigo, the largest maker of store brand over-the-counter drugs, said it would buy Elan for $8.6 billion. Following the acquisition, Perrigo will move its headquarters from Michigan to the more attractive tax environment of Ireland. The deal ends the protracted battle waged by Royalty Pharma to acquire Elan and offers Elan shareholders $1 more per share than Royalty Pharma's top bid, which included $2.50 per share in contingent value rights. Besides the $150 million a year in tax and operational savings Perrigo expects, the company says the deal will provide it with a platform for international expansion.

Cubist Pharmaceuticals, also active on the M&A front, said it will acquire Optimer Pharmaceuticals and Trius Therapeutics, valuing each company at just more than $800 million. Both companies are developing drugs to combat bacterial infections. Optimer's Dificid won regulatory approval in May 2011 to treat C difficile associated diarrhea, while Trius' antibiotic for the treatment of gram-positive infections, including MRSA, is in late-stage development. Both deals involve an upfront cash payment and contingent value rights based on the achievement of sales milestones.

Year-to-date global M&A activity at the end of July rose to $75.8 billion, just 2.3 percent below the same period in 2012. Nevertheless, the value of acquisitions of U.S. companies with disclosed deal terms is down 23.3 percent compared to last year.

"With Roche in pursuit of Alexion Pharmaceuticals and several suitors chasing after Onyx Pharmaceuticals, 2013 is on track for a solid year of M&A activity," says Burrill. "The strong IPO market will not only provide promising life sciences companies with alternatives to being acquired, but will help drive valuations and force suitors to dig deeper into their pockets to get deals done."

Partnering activity is running ahead of last year as large pharmaceutical companies continue to look externally to fill their pipelines. Global partnering is up 10 percent year-to-date compared with the same period in 2012. FibroGen's $815 million strategic collaboration with AstraZeneca was the month's largest agreement. The two companies will develop and commercialize FibroGen's mid-stage experimental treatment for anemia associated with chronic and end-stage kidney disease. FibroGen will get $350 million in committed upfront and subsequent payments from AstraZeneca, up to an additional $465 million in milestones, and undisclosed royalties.

Privately held life sciences companies raised $7.2 billion globally since the beginning of the year, on par with last year's financings. U.S. financings, at $5.7 billion year-to-date, led the way. While access to capital for private companies has improved, most of the bigger deals were completed by companies with products in later development stages. JenaValve's $62.5 million series C round to fund commercialization of its transcatheter aortic valve implantation system, was the biggest venture financing of the month. The FDA's Center for Drug Evaluation and Research approved one new molecular entity in July, Boehringer Ingelheim's Gilotrif. The new therapy helps patients with late stage non-small cell lung cancer with tumors expressing specific types of epidermal growth factor receptor mutations. The approval raises the agency's new drug approval total to 14 for the calendar year, compared to 17 completed by July 31, 2012.

In an effort to craft an alternative to European Medicines Agency's efforts to make clinical trial data more freely available, pharmaceutical industry trade groups in the United States and Europe offered their own set of principles for information sharing. Advocates of transparency criticized the industry's effort as "weak and filled with loopholes." The issue will likely be resolved in the courts rather than at the negotiating table as both AbbVie and Intermune have blocked the EMA from moving forward with its policy pending a court ruling. The August
2013 issue of The Burrill Report examines the issue and can be downloaded for free at

The industry turned its attention to China and India during July as scandals brewed. Problems in those countries highlighted long-running challenges of doing business in those markets. GlaxoSmithKline joined the growing roster of American companies ensnared by allegations of bribery and other corruption in their Chinese operations. Meanwhile, the National Institutes of Health cancelled as many as 40 ongoing clinical trials in the country due to problems with the way in which some trials were conducted. "Emerging markets continue to be attractive to life sciences companies that see rising demand for their products as prosperity grows," says Burrill. "However, the optimism that surrounded entry into these markets is now being tempered by the real risks of doing business there."

About Burrill & Company

Founded in 1994, Burrill & Company is a diversified global financial services firm focused on the life sciences industry. With $1.5 billion in assets under management, the firm's businesses include venture capital/private equity, merchant banking, and media. By leveraging the scientific and business networks of its team, Burrill & Company has established unrivaled access and visibility in the life sciences industry. This unique combination of resources and capabilities enables the company to provide life sciences companies with capital,
transactional support, management expertise, insight, market intelligence, and analysis through its investments, conferences, and publications. Headquartered in San Francisco, the company oversees a global network of offices throughout the United States, Latin America, Europe, and Asia. For more information visit: