Biotech, Dealtalk

Biotech IPOs Start to Show Some Modest Signs of Life

Posted on 03 May 2012

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Something feels wrong about putting the words “biotech” and “IPO” together in a headline. Th biotech IPOs market has been lifeless for so long that few investors even play the game anymore. Biotech entrepreneurs I talk to seem to feel a bit sheepish about saying they are considering an IPO, probably because they know most people will just roll their eyes.

But a strange thing has started to happen in 2012. A few biotech IPOs have been modestly successful. And even though biotech executives could be excused for missing the news that 2012 is shaping up to be the biggest IPO year since 2000, there are signs that biotech IPOs have a fighting chance.

This feels odd to say, since I’ve been dismissive of biotech IPOs for some time. I wrote back in January that even though people were predicting the return of biotech IPOs, “it’s nothing more than wishful thinking.”

There is plenty of reason for pessimism. Back in 2010, the blue chip offering from Cambridge, MA-based Ironwood Pharmaceuticals (NASDAQ: IRWD) was supposed to open the proverbial “window” for others. It didn’t. The next year, one of the bellwether private biotechs—Berkeley, CA-based Plexxikon—looked at the IPO options, and discovered that Big Pharma valued its melanoma drug far more than Wall Street did. Before the year was done, LinkedIn and Groupon made IPO debuts that dwarfed the entire biotech industry IPO class of that year.

It would be wrong to say that things have fundamentally changed in a positive way for biotech. Technology has produced 21 IPOs already this year, while healthcare has cranked out just four, according to Renaissance Capital’s IPO Home. But those four biotech companies—Cambridge, MA-based Merrimack Pharmaceuticals (NASDAQ: MACK), Mountain View, CA-based hemoCentryx (NASDAQ: CCXI), Chapel Hill, NC-based Cempra (NASDAQ: CEMP), and Cambridge, MA-based Verastem (NASDAQ: VSTM) have all held their own in their early days of trading as public stocks this year.

Read the full story at Xconomy

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