Health of Public Markets
The companies and especially their prospective investors will have a better feel for the health of the market as each company works out key details of their IPOs. Of the 29 biopharma IPOs launched over the past two years, 19 were forced to lower their share prices from initial estimates. Of the remaining 10 IPOs, five priced at the low end of their ranges, two at the middle of their ranges, two at the high end, and only one surpassed its initial price range altogether.
Another way to measure the health of the biopharma IPO market for this year will be to see how many companies backtrack on plans to go public. Since 2010, six biopharmas have withdrawn their IPOs. Ambit Biosciences, Agendia, Clarus, and Quark Pharmaceuticals all found the market more difficult than anticipated, while Rules-Based Medicine took Myriad Genetics’ $80 million acquisition offer after its own withdrawal, and Advanced BioHealing found a $750 million buyout by Shire too tempting to resist.
“What ends up happening is that the very best companies that don’t have to go public—i.e., they have other ways of raising capital—they don’t go public,” Carusi pointed out. “Those companies that do go public are those that need the capital and may have a syndicate of investors who are tired or not able to continue to fund the company or who have other factors for why they choose the lesser outcome.”
Absent a dramatic change in conditions that have dampened the overall public markets and a turnaround in investor confidence, the biopharma IPO market this year will likely continue a slow thaw. But it’s not likely to be enough to pull it out of the deep freeze in which it has been since the onset of the most recent recession in 2007.