For the second consecutive quarter we have seen positive gains for biotech, fueling the notion that the worst of the economic woes that have assailed the sector may finally be over. While biotech’s year-to-date performance still lags behind the general markets, there have been some encouraging signs that investors are coming back. These include the tremendous stock gains of Human Genome Sciences (share value up 555% in the quarter) and Targacept (share value up 783% in the quarter), driven by positive clinical data from their lead drug product candidates.
With the comparative stabilization of the capital markets, we are also seeing some encouraging signs of good things to come. For example, the total that U.S. biotechs raised through follow-on financings in the third quarter is up over 100% of the total raised in 2008. This type of financing is generally a harbinger of the opening of the IPO window. In August, one biotech IPO did get out the door when Cumberland Pharmaceuticals raised $94 million. The specialty pharmaceuticals company has products on the market, including a new injectable treatment for pain and fever, which is one of the reasons why the deal got done.
Biotechs Test IPO Waters
Following Cumberland’s lead, several biotech companies are planning to test or have already tested the IPO market:
- Talecris Biotherapeutics closed a public offering in October. The firm sold 56 million shares at $19 per share, generating $1.06 billion. Like Cumberland, the company has products on the market, and its 2008 sales were $1.4 billion.
- Anthera Pharmaceuticals filed to sell up to $70 million in stock to fund its drug-development programs. Anthera is focused on inflammatory diseases and has one drug ready for Phase III trials.
- Omeros is offering 6.82 million shares of its common stock, priced at $10 to $12 per share, which could generate as much as $81.8 million. Omeros is focused on inflammation and CNS disorders.
U.S. Biotech Financings
Financings and partnering deals collectively brought in over $13 billion for U.S. companies in Q3 ’09, with over $4 billion through financings and $9 billion in partnering capital. This 147% increase in capital raised compared to the Q3 ’08 total clearly shows that the financial climate for biotechs is improving.
Venture capital raised year-to-date was up 5.6% over the same period in 2008. However, the average amount of capital raised per deal fell from $20 million in 2008 to $12 million in 2009.