A rough year for biotech IPOs

Dive Brief:

  • The past year has been challenging for the biotech sector, as stocks slipped amid moderating venture funding and a subdued M&A environment. Ongoing scrutiny of rising drug prices also helped to blunt market enthusiasm. 
  • That turbulence can be seen in the uneven performance of the biotech companies which debuted on public markets this year. While 18 companies have notched gains since initial public offerings, another 14 have seen their stock fall below IPO levels. 
  • Among the biotechs that braved an IPO, a handful have soared. Shares in Avexis, Reata Pharmaceuticals, Merus N.V., Protagonist Therapeutics and Novan Inc. all gained more than 80% compared to the original IPO price (through December 22). 

Dive Insight:

When 2016 began, the IPO market looked particularly moribund — and not just for biotechs. Not a single company launched an IPO in January and only eight companies had priced an offering by the end of the first quarter. 

IPO activity did pick up as the year progressed, but 2016 will almost certainly fall well short of last year's total of 170 offerings. 

The healthcare sector has helped prop up 2016's numbers, however, with more IPOs (42) than any other industry. And biotech has been a big part of that.

According to numbers reported by Nasdaq, 32 biotech companies have launched on public markets so far this year, including notables such as the three CRISPR biotechs and NantHealth, part of billionaire Patrick Soon-Shiong's "Nant" empire. 

But the (stock) winners so far may be less well known. Shares of Avexis, Merus and Novan have more than doubled in value since IPO. 

Merus, for example, shot up this week on news Incyte Corp. had committed $200 million in a collaboration deal that lines up as much as $2.8 billion in milestone payments. 

Avexis' rise, on the other hand, was driven by gathering momentum for its spinal muscular atrophy drug. A pivotal study of the drug in set to begin in the first half of 2017 and, as a one-time gene therapy, it could present a competitive challenge to Biogen's more advanced nusinersen.

With 2016 coming to a close, analysts have turned toward biotech's prospects in 2017. Some foresee an improving deal environment, and continued strength in venture funding should help emerging biotechs get off the ground. 

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Filed Under: Corporate News