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Biotechs glimmer in dismal IPO market

First-quarter initial stock offerings hit a seven-year low

by Ann M. Thayer
April 4, 2016 | A version of this story appeared in Volume 94, Issue 14

Initial public stock offerings have declined since mid-2015
Source: Renaissance Capital
Graph of combined value and number of IPOS per quarter from 2014 through 2016.
Initial public stock offerings have declined since mid-2015
Source: Renaissance Capital

Continuing a decline that began mid-2015, initial public offerings (IPOs) of stock dropped precipitously in the first quarter of 2016. Just eight companies—the lowest quarterly number since 2009—raised a combined $700 million through U.S. IPOs, reports the investment tracking firm Renaissance Capital.

As home to all eight, the health care sector was the only bright spot. But IPOs for these early-stage firms might not have happened were it not for existing investors buying 40% of the shares on average. At Editas Medicine, which is developing therapies around CRISPR gene editing, insiders bought 67% of the $94 million worth of shares it sold in February.

U.S. IPOs by Chinese companies were the only ones to garner more than $100 million. The established drug firm Hutchison China MediTech, which has been on the London stock exchange for 10 years, raised $101 million in March. Immuno-oncology drug developer BeiGene amassed $158 million in February. It was also China’s first biotech to go public in the U.S. in the past 10 years, according to Renaissance.

There are signs of improvement. Twenty-four new filings for stock offerings were made in the first quarter of 2016, although that’s half the number for the same quarter in 2015 and one-quarter of that in 2014. Altogether, about 118 companies have pre-IPO paperwork on file, and 18 of the 42 that Renaissance considers most active are in health care.

“The market’s rally and lower volatility during the second half of the quarter is an encouraging sign for IPO issuance,” Renaissance says. “The IPO market will likely proceed carefully at first, as it did in 2009.”


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