Biotech IPOs Are On A Tear

While tech IPOs commonly generate a lot of buzz and big first-day gains, the same cannot be said for biotech.

Typically, venture-backed biotech companies go public well before they’re generating revenue. For these companies, an IPO is less an exit and more a financing event, aimed at amassing capital for the costly work of R&D and clinical trials.

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Given the lack of flashiness, most of us probably wouldn’t recognize the names of life sciences companies that tapped public markets this year. There are exceptions, such as last week’s blockbuster debut of CureVac, the German biotech deploying its messenger RNA technology in COVID-19 vaccine development. Overall, however, they’re an obscure bunch.

Yet taken in aggregate, the numbers speak for themselves: Biotech IPOs are going gangbusters this year.

So far in 2020, at least 37 venture-backed North American life sciences companies have carried out IPOs (see list), raising a total of $6.7 billion. By comparison, in all of 2019, the same cohort pulled in just $5 billion across 51 public offerings. 

Overall, this year is easily on track to post the highest biotech IPO numbers in five years. And not only are companies raising a lot of capital, they’re generating comparatively high market valuations as well. That’s illustrated in the chart below.

A few deals this year stand out for size or performance:

• New Jersey-based Legend Biotech, a developer of cellular therapies backed by a host of large-cap pharmaceutical companies, raised $424 million in its June IPO, and was recently valued around $4 billion.
• Relay Therapeutics, a company applying its expertise in protein motion to the drug discovery process, just raised $400 million in a late July offering. Shares of the Massachusetts company are trading for roughly double the initial offering price.
• Pliant Therapeutics, a developer of therapies for the treatment of fibrosis, raised $144 million in its June IPO. Shares of the South San Francisco, California-based company have fallen from late June highs, but are still up more than 50 percent from the initial IPO price.

We should note that it’s not just biotech IPOs that are up in 2020. Venture funding to life sciences companies is up as well, as we covered in July, which bodes well for the pipeline of startups eyeing future offerings.

Additionally, the combination of a receptive market for new issues and a strong recent track record of post-IPO performance indicates we’ll probably see the high volume of biotech offerings continue. 

Another factor to consider: The search for COVID-19 therapies and vaccines has led to heightened public and investor interest in the inner workings of biotech. There’s good reason to presume that will only intensify should biotech innovation be the force that eventually puts the pandemic behind us.

Illustration: Li-Anne Dias