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There are now eight biotech IPOs for 2011, bringing the total for the recent US IPO window to 28. Post-IPO performance is finally picking up with the median return at +14% for these 28 IPOs.
Advanced BioHealing was scheduled to IPO this week, but Shire (SHGPY) came in with a $750M offer to buy the company. Sagent Pharmaceuticals (SGNT) was the most recent IPO, back in April. Sagent is a specialty pharma company selling injectable products in the therapeutic areas of cardiovascular, anti-infective/antibacterial, antineoplastic agent, and antiemetic.
The median raised vs. filed is still at -30% as seen in the following chart. Only two companies, Sagent and Pacific Biosciences, have been able to raise the amount they originally filed for. However, the second chart below shows the stock performance for the 28 US companies – a lot more green bars can be found than in the past. Aveo (AVEO) and Ventrus (VTUS) are literally off the chart with >100% gains. Bottom line: still a mixed bag for IPOs.
Twice a year, in May and November, the NASDAQ OMX Group re-ranks the closely watched Nasdaq Biotechnology Index (NBI). This Monday (May 23rd), six companies will be added to the Nasdaq Biotech index and two will be removed.
The additions are Achillion Pharmaceuticals (ACHN), AVEO Pharmaceuticals (AVEO), Columbia Laboratories (CBRX), ISTA Pharmaceuticals (ISTA), Pacific Biosciences (PACB) and Zalicus (ZLCS). The two companies to be removed from the NBI are Biodel (BIOD) and China Sky One Medical (CSKI). This will result in the index having 126 companies total, up from 122 today.
Of the eight or so requirements for index inclusion, two stand out: Biotech companies must have a market capitalization of $200M and have an average trading volume of 100,000 shares per day. To remain in the index, the company market capitalization must be $100M, with an average of 50,000 shares traded per day.
The re-ranking noted above should not be confused with re-balancing, which takes place every quarter (on the 3rd Friday of March, June, September, and December). More on the eligibility criteria and Nasdaq index methodology can be found here.
For more about the added securities, see below:
The six biotech IPOs of 2011 have followed 2010’s IPO trends; all took significant haircuts getting out the door and most are performing modestly. The median downward adjustment in the amount raised for 2011’s biotech IPOs stands at -31%, the average is at -33%. These companies have raised a median and mean amount of $49M and $54M, respectively.
Despite the lukewarm IPO reception biotech stocks have faced in the U.S., two more U.S. companies have filed to go public since the close of 2010. Specialty pharmaceutical company Insys Therapeutics plans to raise $55M, while regenerative medicine company Advanced BioHealing aims for $200M. (Update: Aldagen decided to pull their $80M IPO plans today)
The real IPO story continues to be China’s streak of pharma and biotech listings. Five Chinese biopharma companies have gone public so far this year, along with a host of CROs and supply companies. These biopharma companies raised an average of $172M in their debuts on the Shenzhen Stock Exchange (excluding TCM company Tibet Pharmaceuticals, which raised $16.5M in its debut on the NASDAQ in January). With China exhibiting such an appetite for biotech offerings, it comes as little surprise that Asian companies are joining the IPO queue, with some public Chinese companies even opting for secondary offerings in Hong Kong.
Looking forward in 2011: 33 Biotechs have filed to go public. As the list in Table 3 shows, 19 of these are in the US. Below is the performance of the 26 US IPOs sorted by date of IPO (left to right). Note that Tranzyme Inc (TZYM) was the most recent US IPO, on April 1st, 2011.
Remember this BTK post we wrote back in February of 2010? Well, we thought it was time to revisit the makeup of the BTK index (NYSE Arca Biotechnology Index). Five of the 20 companies that comprised the index in February of last year have either been acquired or are facing acquisition. That means 25% of the entire index has been snapped up in a little over a year (Table 1).
Millipore (MIL) and OSI Pharmaceuticals (OSIP) acquired in 2010 by Merck KGaA and Astellas, respectively, have already been removed from the index, making room for new additions Dendreon (DNDN) and Qiagen N.V. (QGEN). If Valeant’s $73/share all-cash offer for Cephalon (CEPH) goes through, the BTK could see three new companies added in 2011.
It is also worth noting that only five (four if Cephalon is acquired) of the original 15 biotech companies that comprised the BTK in 2000 remain today (Table 2).
Antibody and antibody-like scaffold molecules have been on the pharma licensing radar for some time. The pharma business development interest in these drug candidates stems largely from the targeted mechanisms of action, structural uniqueness of the molecules, strong IP, and portfolio diversification benefits. To analyze deal trends in this niche area of biotechnology, we screened the Windhover/Elsevier Strategic Transactions Database for “Biotechnology” deals, with “Antibody” or “Large Molecule” identifiers, from 2007-2010. From this initial list, marketed product deals were removed. Furthermore, University/Tech Transfer deals were excluded.
Although more and more pharmas have expanded their R&D on the biologics front, the overall number of pipeline deals over the last four years fails to show an uptrend. Chart 1 below shows a drop in the total number of these deals since 2007. However, preclinical candidate deals appear to rebounding from the 2008 nadir:
BIO CEO’s closing plenary session featured plenty of crystal ball gazing and candid quips about what 2011 has in store for the biotech industry. While the panel provided an in-depth look at how buy-side and sell-side analysts evaluate the industry, the BIO/IPREO Investor Perception Study reveals that the majority of investors believe biotech is headed in the right direction. Access full study deck here: BIO CEO – IPREO Biotech Investor Perception Study
The study also reveals that a majority of investors believe the industry is undervalued.
Investors also believe that M&A and clinical trial news are the most important catalysts when it comes to moving the sector higher. The study also shows that investors believe 2011 will see more biotech IPOs than 2010. If the spate of biotech and healthcare IPOs of the past two weeks is any indication, their feelings are well-placed.
IPREO conducted the study by gathering feedback from 135 investment professionals representing firms with $2 trillion in equity assets under management, including $166 billion invested in healthcare and $38 billion invested in biotech.
Click here to learn more about IPREO.