Biotech IPO slows down after record-breaking 2021

Seven biotech companies have gone public in the US as of February 22 this year, according to data from Nasdaq, compared to 21 on the same date in 2021, with the exchange hosting nearly all stock-market debuts.

According to Nasdaq, the role of innovation and biotech in combating the pandemic attracted investors to the industry in 2021 and 2020. Last year, 111 biotechs went public in the US, up from a previous peak of 91 in 2020.

The SPDR S&P Biotech ETF, an equal-weighted index of biotech stocks, fell nearly 44% over the past year, while the S&P 500 is up slightly. That, along with macroeconomic concerns, such as the prospect of rising interest rates and a possible Russian invasion of Ukraine, is giving IPO buyers pause, investors said.

“The industry was in for a rebalancing,” said Nina Kjellson, a general partner with venture firm Canaan Partners.

Rahul Choudhary, head of healthcare equity capital markets for investment bank SVB Securities LLC, said investors have been inundated with biotech IPOs, and there haven’t been significant clinical trial successes recently. He added that with stocks of many biotechs declining since going public, investors looking for lucrative opportunities don’t necessarily buy into IPOs.

“A large number of companies that went public stopped people and said, ‘Maybe we need to slow down the spigot,'” Mr. Chowdhury said.

Investors said the tight IPO market has yet to make a huge difference in biotech venture-capital financing. According to Silicon Valley Bank, US biotech startups raised $29.66 billion in venture capital last year, up from $20.05 billion in 2020 and $12.55 billion in 2019.

Additionally, according to SVB, US healthcare venture capitalists achieved $28.3 billion in 2021, compared to $16.8 billion a year ago.

Because many biotech startups are well-funded and venture capital remains abundant, the biotech hasn’t felt a significant pinch yet, though that will change if the IPO slump persists well into the year, some investors said. he said.

The firm’s founder, chief executive and chief investment officer Frank Yu said, “Ely Bridge Group is advising startups not to rush towards IPOs as private capital is readily available. Ally invests in private and public healthcare companies.

Many industry fundamentals remain strong, investors and analysts said, citing continued innovation and reduced regulatory uncertainty due to the recent confirmation of Robert Califf as commissioner of the Food and Drug Administration.

Some observers said the biotech IPO would rebound as companies generate positive clinical trial data and broader market challenges ease. Jordan Saxe, head of healthcare listings for Nasdaq, said the number of biotechs planning to go public in the next 12 to 18 months is comparable to the number in recent years.

“Inventory is strong, the question is going to be on the demand side – how many are ending this year versus next year,” Mr Saxe said.

The biotech shouldn’t even settle on an IPO, said Lee Cooper, a venture investor with Leaps by Bayer, the venture-capital arm of life-sciences company Bayer AG.

He said that in biotech, IPOs should be considered as a way of funding the development of a new drug.

,[An] The IPO is a major financing event,” Mr. Cooper said. “But it is not the end game for the biotech company.”