The second half of 2011 was weak both in the amount of capital raised and in the number of transactions completed. These results reflected the challenging environment for financial markets worldwide in the second half of 2011 that followed optimistic expectations during the first half of the year.
Registered follow-on equity offerings for life science companies suffered at least as badly if not worse than registered follow-on offerings for companies across all industries (Figure 2). However, the life science sector began to show strength in the second half of December, and life science stocks continued the trend deep into January. Therefore, although much of the global capital market challenges from 2011 remain, we believe that a sentiment of cautious optimism for life science capital markets overlays the general economic uncertainty.
At-the-market (ATM) offerings followed a similar trajectory as conventional follow-on offerings (Figure 3; fourth-quarter gross proceeds and active ATM data not available at time of writing), although the decline in gross proceeds in the third quarter of 2011 vs. the second quarter of 2011 was less (-60% compared to conventional offerings decline of -77%).
New sign-ups of ATM offerings in the fourth quarter remained sluggish though the sign-ups that were recorded occurred late in the quarter during a period when life science stocks began to rally.
As a reminder, ATMs differ from conventional follow-on offerings by enabling the issuer, through an agent, to sell shares into the market over a period of time determined by the issuer at a minimum predetermined price (see Shopping for Financing: “At-the-Market”, GEN, January 15, 2012). By design, they are flexible financing vehicles that enable the issuer to maintain control of its capital-raising activities including the timing of share sales.
Both the number of and the amount of capital raised through conventional follow-on offerings and ATM offerings reflected performance of the equity markets. The S&P 500 and the AMEX Biotechnology Index (BTK) increased 5% and 13%, respectively, in the first half of 2011. Both indices declined in the second half of 2011, -5% for the S&P 500 and -25% for the more volatile BTK.