Almost all of the biotech IPOs that have priced since the first quarter have broken issue, meaning that they are now trading below their offer price. That’s not an auspicious sign for the sector--and is comparable to the poor performance for 2015 in which four out of five IPOs are trading under the offer price, according to data from Renaissance Capital.
In addition, IPOs are leaning more than ever on existing investors buying shares in the IPO. The average portion going to insider buying is 40% for 2016 biotech IPOs; that's double the roughly 20%-per-deal average for each of the last two years.
The latest example of an underwhelming biotech IPO, of course, is scandal-tainted Kadmon ($KDMN), which priced this week at $12 but is already down by almost 20%, languishing in the single digits. Kadmon insiders had to commit to buying more than half of that IPO. NantHealth, which also has its own hint of scandal with an ongoing lawsuit by former senior employees that alleges fraud, has fallen by 25% since its June IPO.
Biotech is entirely alone, not joined by its technology peers, in its languishing IPO prices. For nonbiotech IPOs, a whopping 29 out of 30 that have priced this year remain above their offer price, by an average of 28%.
The biotech IPOs from the first quarter managed to fare much better than those since then or in the year before. Of those 7 IPOs, 5 are still trading above the offer price with an average increase of 28%, exactly on par with the nonbiotech performance thus far this year.
August won’t be much better. The dog days of summer don’t typically see many, if any, biotech IPOs. Right now, no biotech companies are on the road for an IPO, unless you count Gemphire Therapeutics, which has been trying to get a $45 million IPO out the door for a few weeks now.
Also, AIM-listed Motif BIO ($MTFB) does plan to conduct its first Nasdaq offering this summer to back its pipeline of antibiotics targeting drug-resistant bacteria to raise $35 million.
But going into the fall, investors are surely looking for more promising, higher quality IPOs. And VCs will be under pressure to deliver, given the rampant underperformance of biotech IPOs for most of this year and all of last.
- here is the Renaissance Capital data
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