Insights

Biotech IPOs see significant growth

July 31, 2013

Management Liability/D&O

The biotech IPO market is finally looking up. After the recession and subsequent slow recovery resulted in few IPOs, it appears the industry is finally staging a comeback.

Q2 2013 hints at surging biotech industry

Recently released data from the National Venture Capital Association (NVCA) and Thomson Reuters revealed 11 of the 21 offerings during Q2 2013 were in the biotech sector, and life sciences IPOs made up 62 percent of the total issues over the previous three months. This is a significant reversal from previous quarters and these numbers make Q2 2013 the strongest quarter for the biotech market since Q3 2000, when 13 companies went public. Offerings totaled $1 billion, nearly half of the $2.1 billion raised across industries during the quarter.

“We have been predicting an IPO pickup in the second half of 2013 and it appears as if this momentum has begun, driven by the strong biotechnology offerings,” said Mark Heesen, president of the NVCA. “We are hopeful that this positive trend will not be impacted by negative externalities in the second half of the year, as has been the case over the last several years. While on the surface, the low acquisitions volume thus far in 2013 could appear problematic, our market intelligence is telling us that there is a great deal of inbound interest for venture-backed targets, suggesting that these companies are holding out for better pricing from strategic buyers.”

While down overall, merger and acquisition activity in the biotech industry thus far in 2013 has included some interesting and high-profile transactions.  For example, Johnson & Johnson acquired Aragon Pharmaceuticals for up to $1 billion, with $650 million paid upfront, while AstraZeneca acquired Pearl Therapeutics for up to $1.2 billion, with $560 million paid upfront, according to a report from Burrill & Company.  Having a real alternative in the form of an IPO does, no doubt, help support healthy acquisition prices for private biotech companies.

But even with a few strong M&A deals and the strong biotech IPO numbers, some concerns have arisen. While mostly optimistic, Forbes contributor Bruce Booth notes that “the biotech IPO window hasn’t been this open for 13 years … but we’re only a quarter or two into an interesting market.” As the biotech industry becomes more exciting and high profile in the quarters ahead, it remains to be seen if this trend will continue.

And there’s the concern that always gets articulated whenever a sector gets hot: hot sectors on their way to becoming over-heated sectors inevitably attract weak offerings. When this happens the biotech IPO window will, inevitably, shut.

Still, right now, it seems that the window is open and the skies are—relatively speaking—blue.


The views expressed in this blog are solely those of the author. This blog should not be taken as insurance or legal advice for your particular situation. Questions? Comments? Concerns? Email: phuskins@woodruffsawyer.com.

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All views expressed in this article are the author’s own and do not necessarily represent the position of Woodruff-Sawyer & Co.

Priya Cherian Huskins

Senior Vice President, Management Liability

Editor, Management Liability/D&O

Priya is a recognized expert and frequent speaker on D&O liability risk and its mitigation. In addition to consulting on D&O insurance, she counsels clients on corporate governance matters, including ways to reduce their exposure to shareholder lawsuits and regulatory investigations. Priya serves on the board of an S&P 500 public company and a large private company and has an impressive list of publications, speaking engagements, and awards for her influence and expertise in the industry. 

415.402.6527

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Priya Cherian Huskins

Senior Vice President, Management Liability

Editor, Management Liability/D&O

Priya is a recognized expert and frequent speaker on D&O liability risk and its mitigation. In addition to consulting on D&O insurance, she counsels clients on corporate governance matters, including ways to reduce their exposure to shareholder lawsuits and regulatory investigations. Priya serves on the board of an S&P 500 public company and a large private company and has an impressive list of publications, speaking engagements, and awards for her influence and expertise in the industry. 

415.402.6527

LinkedIn