Stemline Therapeutics became the first biotech to debut on Wall Street this year. And while it priced its shares at the bottom end of the $10 to $12 range, Stemline ($STML) also added a million shares to the IPO and saw its share price surge 18% on opening day, burnishing expectations that a strong healthcare sector could inspire a string of badly needed exits in biopharma.
After the financial crisis of 2008, biotech suffered through a lengthy IPO drought as investors shunned risk--about the only surplus commodity in the biotech industry. Rare IPOs, most of which featured desperate developers willing to slash prices, added to complaints among venture groups that their chance at cashing out of the young developers they backed was being limited to M&A deals. And the few successes required heavy insider support. So a few months ago when Intercept and Kythera nailed IPO prices at the top of their range--once a goal reserved for the very few--hopes were raised that the turnaround had finally arrived. Stemline's relative success with 2013's first biotech IPO--raising $33 million--is likely to encourage more to follow.
Stemline's business profile looks familiar. It's engaged in mid-stage development work with a trail of expenses and no income. But in a strong market, that's no longer the kiss of death.
In its S-1 filing with the U.S. Securities and Exchange Commission, Stemline boasted that its two lead programs for SL-401 and SL-701 amply demonstrate its potential in targeting cancer stem cells and tumors. Another biotech, Verastem, recently pieced together a successful IPO with its cancer stem cell study. Stemline is planning to put 401 into a Phase IIb study of 200 patients with relapsed or refractory acute myeloid leukemia while 701 will be pushed into a pediatric study for brain stem glioma and a separate trial for adult glioblastoma, or brain cancer.
Next up in the IPO queue is KaloBios, which hopes to raise cash from investors willing to believe in its boast that it can develop new and improved antibodies, which historically have enjoyed a relatively high success rate in the clinic. Another success would likely inspire similar IPOs, maintaining a mini streak that will last as long as investors continue to demonstrate an appetite for gut-wrenching risk.
- here's the story from The Wall Street Journal
Special Report: Top 10 biotech IPOs of 2012