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Printed by/ Email
Stacy the
By Stacy Lawrence
Author /Elsevier
“The Pink
Sheet” Oct.
1, 2012,
By Stacy
Lawrence
/ Email the Author / “The Pink Sheet” Oct. 1, 2012,
Vol.
74, No.
40
Vol. 74, No.
40
Business
& Finance
/ Word Count: 2045 / Article # 00120924007
More And Better Biotech IPOs, But
Step-Ups
Still Lag
Executive
Summary
Higher
valuations,
better quality companies, improved aftermarket performance
Executive
Summary
Business & Finance
/ Word Count: 2045 / Article # 00120924007
Executive
Summary
and
a broadening
investor pool are all conspiring to advance the state of
biotech IPOs. But VCs continue to see little step-up at IPO.
Higher
companies,
improved
performance
By
Stacyvaluations,
Lawrencebetter
/ Emailquality
the Author
/ “The Pink
Sheet”aftermarket
Oct. 1, 2012
,
Higher
valuations,
better
quality
companies,
improved
aftermarket
performance
and
a
broadening
investor
pool
are
all
conspiring
to
advance
the
state
of
Vol. 74, No. 40
and a broadening
investor
pool
are
all conspiring
advance
biotech
IPOs.
But VCs
continue
to 2045
see
little
step-up
at
IPO. the state of
Business
& Finance
/ Word
Count:
/ Article
# to
00120924007
biotech IPOs. But VCs continue to see little step-up at IPO.
The biotech initial public offering (IPO) market has been improving marginally
after an abysmal few years. But that doesn’t mean most venture capitalists are
Executive
Summary
likely to see any
real appreciation of their investments at IPO anytime soon.
The biotech initial public offering (IPO) market has been improving marginally
The biotech
initial
public
offering
(IPO)
market
hasIPOs
been
improving
marginally
after
an abysmal
few
years.
Butmore
that
doesn’t
mean
mostthis
venture
capitalists
Bankers
expect
there
could
be
U.S.
biotech
year than
in anyare
Higher
valuations,
better
quality companies,
improved
aftermarket
performance
after an
abysmal
few
years.
that
doesn’t
mean
capitalists
likely
to
see
any real
appreciation
ofIPOs
their
investments
at venture
IPO
anytime
soon.are
since
2007.
There
have
beenBut
eight
thus
far in most
2012.
Through
year-end,
and
a to
broadening
investor
pool areofalltheir
conspiring
to advance
the state of
likely
see anyhalf-dozen
real
appreciation
investments
at IPO
another
roughly
IPOs could price,
bringing the
totalanytime
to 14. soon.
biotech
Butthere
VCs could
continue
to seeU.S.
littlebiotech
step-upIPOs
at IPO.
BankersIPOs.
expect
be more
this year than in any
Bankers
expect
there
could
be
more
U.S.
biotech
IPOs
thisThrough
year
in any at
since
2007.
There
have
been
eight
IPOs
thus
far
in
2012.
year-end,
In addition to the potential for more biotech IPOs, the valuation
ofthan
companies
sincealso
2007.
have
been
eight
IPOs
thusbringing
far
2012.
Through
year-end,
another
roughly
half-dozen
IPOs
could
price,
the
to 14.
IPO
hasThere
been
climbing.
VCs
and
bankers
seeinthis
as total
a
signal
that
the
anotherofroughly
half-dozen
could
price,
bringing
total been
to 14.acquired, is
quality
companies
that goIPOs
public,
rather
than
alreadythe
having
In addition to the potential for more biotech IPOs, the valuation of companies at
The
biotech
initial public
offering
(IPO)
market
has investors
been improving
marginally
starting
to improve.
That’s
because
public
market
are more
willing to
In addition
to been
the potential
forVCs
more
biotech
IPOs,
of companies
IPO
also has
climbing.
and
bankers
seethe
thisvaluation
as a signal
that the at
after
an abysmal
few years.
Butofthat
doesn’t
mean most
venture
capitalists
are
ascribe
higher values
to some
these
companies
than those
that
the industry
IPO also
been climbing.
and
bankers
this as
a signal
that
the
quality
of has
companies
that go VCs
public,
rather
thansee
already
having
been
acquired,
is
likely
to see
anythe
real
appreciation
has seen
over
past
few years.of their investments at IPO anytime soon.
quality oftocompanies
that go
public, public
rather market
than already
having
starting
improve. That’s
because
investors
arebeen
moreacquired,
willing to is
starting
to
improve.
because
public
market
investors
arethat
more
willing
ascribe
higher
values
to some
of
these
companies
than
those
thein
industry
Bankers
expect
thereThat’s
could
be more
U.S.
biotech
IPOs
this
year
than
any to
Once
biotechs
reach
the
public
market
via
IPO, their
performance
isn’t
quite
as
ascribe
higher
values
to
some
of
these
companies
than
those
that
the
industry
has
seen
over
the
past
few
years.
since
2007.
There
been
eight IPOs
thus
2012.
year-end,
poor as
it has
beenhave
for IPO
classes
in each
offar
theinlast
fewThrough
years. That
means
has
seen
over
the
past
few
years.
another
roughly half-dozen
IPOs
price,
bringingVCs
the and
totalcompanies
to 14.
public investors
are a bit more
in could
sync with
bankers,
on
Once biotechs reach the public market via IPO, their performance isn’t quite as
how IPOs are pricing.
Once
biotechs
reach
public
market
via IPO,
their
performance
isn’tmeans
quite as
poor
as
it has
been
forthe
IPO
in each
of the
lastvaluation
few years.
That
In
addition
to the
potential
forclasses
more
biotech
IPOs,
the
of companies
at
poor
as
it
has
been
for
IPO
classes
in
each
of
the
last
few
years.
That
means
public
investors
are
a
bit
more
in
sync
with
bankers,
VCs
and
companies
on
IPO
been
climbing.
VCsand
andtheir
bankers
see this typically
as a signal
that the
Justalso
priorhas
to an
IPO,
companies
underwriters
propose
a filing
public
investors
are
a
bit
more
in
sync
with
bankers,
VCs
and
companies
on is
how
IPOs
are
pricing.
quality
companies
thatyears,
go public,
rather
than already
having been
range. of
Over
the last few
public
investors
have executed
IPOs acquired,
at a deep
how
IPOs
are
pricing.
starting
That’s range.
because
public
market investors
arerange
more has
willing
to
discounttotoimprove.
that proposed
But
that discount
to the filing
shrunk
Just prior to an IPO, companies and their underwriters typically propose a filing
ascribe
higher
somewhat
thisvalues
year. to some of these companies than those that the industry
Just prior
to an
companies
and their
underwriters
typically IPOs
propose
filing
range.
Over
theIPO,
last few
years, public
investors
have executed
at aadeep
has seen over the past few years.
range. Over the last few years, public investors have executed IPOs at a deep
Perhaps most importantly, bankers also say they’re seeing a larger group of
Once
biotechs
reach
theinto
public
marketIPO.
via IPO,
their have
performance
isn’t quite
as
investors
willing
to buy
a biotech
Investors
seen biotech
market
poor
as itoutperform
has been broader
for IPO classes
in each for
of the
last afew
years.
indices
market indices
almost
year
now,That
and means
some are
public
investors
are
a
bit
more
in
sync
with
bankers,
VCs
and
companies
looking to participate in new ways. As the number of buyers expands, thatonhelps
how
IPOs
loosen
theare
grippricing.
of the so-called “biotech mafia,” a small group of public investors
who largely have dictated the terms of biotech IPOs in recent years.
Financings
Of The
Click an article
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“The Pink Sheet” DAILY
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files f
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IPO
more
Click ainformation
deal headline
more information
Regulus
Therapeutic
GlobeImmune
files f
IPO
GlobeImmune
files f
nets
$42mm through
Related Deals: 2
IPO public offering
initial
Regulus Therapeuti
Strategic Transactions
Regulus Therapeuti
Topics
Covered
in
Click
a deal headline
this Article
more information
GlobeImmune files fo
Click a keyword for
IPO
Perhaps most importantly, bankers also say they’re seeing a larger group of
investors willing to buy into a biotech IPO. Investors have seen biotech market
investors willing to buy into a biotech IPO. Investors have seen biotech market
indices outperform broader market indices for almost a year now, and some are
indices outperform broader market indices for almost a year now, and some are
looking to
to participate
participate in
in new
new ways.
ways. As
As the
the number
number of
of buyers
buyers expands,
expands, that
that helps
helps
looking
loosen the
the grip
grip of
of the
the so-called
so-called “biotech
“biotech mafia,”
mafia,” aa small
small group
group of
of public
public investors
investors
loosen
who largely
largely have
have dictated
dictated the
the terms
terms of
of biotech
biotech IPOs
IPOs in
in recent
recent years.
years.
who
But although
although some
some indications
indications are
are incrementally
incrementally positive
positive –– IPO
IPO valuations
valuations
But
creeping up,
up, after-market
after-market performance
performance improving
improving and
and the
the IPO
IPO investor
investor pool
pool
creeping
broadening –
– venture
venture capital
capital investors
investors likely
likely will
will continue
continue to
to see
see little
little or
or no
no stepstepbroadening
ups in
in valuation
valuation at
at IPO.
IPO. Indeed,
Indeed, VCs
VCs aren’t
aren’t likely
likely to
to see
see their
their investments
investments
ups
increase
in
value
much,
if
at
all,
at
IPO
or
even
in
the
late-stage
venture rounds
rounds
increase in value much, if at all, at IPO or even in the late-stage venture
leading up
up to
to an
an IPO,
IPO, according
according to
to recent
recent data.
data.
leading
Significant valuation
valuation step-ups
step-ups this
this year
year for
for biotechs
biotechs have
have come
come instead
instead at
at early
early
Significant
venture
rounds.
Also,
VCs
continue
to
expect
that
once
companies
reach
the
venture rounds. Also, VCs continue to expect that once companies reach the
public markets
markets hitting
hitting milestones
milestones will
will provide
provide aa significant
significant share-price
share-price boost.
boost. But
But
public
that rarely
rarely has
has been
been the
the case
case for
for IPO
IPO companies
companies from
from the
the last
last few
few years.
years.
that
Stumbling On
On The
The Steps
Steps
Stumbling
Since 2010,
2010, no
no biotech
biotech IPO
IPO has
has at
at least
least doubled
doubled the
the share
share price
price at
at the
the most
most
Since
recent venture
venture round.
round. Four
Four IPOs
IPOs accomplished
accomplished that
that in
in 2010.
2010. In
In the
the last
last few
few
recent
Inc.
came
the
closest
with
a
77%
step-up
from
years,
cancer
company
Tesaro
years, cancer company Tesaro Inc. came the closest with a 77% step-up from
the
prior venture
venture financing.
financing.
the prior
Otherwise,
IPO valuation
valuation step-ups
step-ups have
have been
been 35%
35% or
or less,
less, with
with aa handful
handful in
in the
the
Otherwise, IPO
negative
range, for
for the
the last
last few
few years.
years. That
That seems
seems likely
likely to
to continue
continue to
to be
be the
the
negative range,
case
for biotechs
biotechs with
with IPOs
IPOs currently
currently on
on road
road shows:
shows: cancer
cancer and
and infectious
infectious
case for
Inc.
and
microRNA
company
Regulus
disease
play
GlobeImmune
disease play GlobeImmune Inc. and microRNA company Regulus
Therapeutics Inc.[See
Inc.[See Deal]and
Deal]and [See
[See Deal]
Deal] But
But that’s
that’s not
not the
the only
only potential
potential issue
issue
Therapeutics
for GlobeImmune.
GlobeImmune. Rather
Rather than
than price
price its
its IPO
IPO last
last week
week as
as expected,
expected, the
the biotech
biotech
for
reportedly has
has postponed
postponed its
its offering.
offering.
reportedly
These IPO
IPO step-up
step-up calculations
calculations are
are based
based on
on share
share price
price at
at final
final venture
venture round
round
These
as
compared
to
IPO
share
price.
This
includes
any
adjustments
such
as
the
as compared to IPO share price. This includes any adjustments such as the
ubiquitous reverse
reverse stock
stock splits
splits at
at IPO.
IPO. Our
Our sister
sister publication
publication Start-Up
Start-Up
ubiquitous
regularly does
does an
an analysis
analysis of
of total
total venture
venture capital
capital invested
invested versus
versus
regularly
valuation at
at IPO
IPO or
or acquisition,
acquisition, aa slightly
slightly different
different calculation
calculation that
that itit also
also
valuation
dubs step-up
step-up ("New
("New Biopharma
Biopharma IPOs
IPOs Show
Show Modest
Modest Step
Step Up
Up In
In Step-Ups"
Step-Ups" —
—
dubs
START-UP,May
May 2012).
2012).
START-UP,
“With respect
respect to
to the
the deals
deals that
that have
have priced
priced so
so far
far and
and the
the ones
ones likely
likely to
to come
come in
in
“With
the
next
12-18
months,
the
step-up
multiples
are
very
specific
to
the
deals
that
the next 12-18 months, the step-up multiples are very specific to the deals that
Swann &
& Co.
Co. He
He said
said it’s
it’s the
the
are going
going out,”
out,” noted
noted Rahul
Rahul Chaudhary
Chaudhary of
of Leerink
Leerink Swann
are
fundamental
appeal of
of the
the drug,
drug, the
the prior
prior success
success of
of the
the management
management team
team and
and
fundamental appeal
the
amount of
of capital
capital supporting
supporting the
the company
company that
that largely
largely set
set the
the valuation.
valuation.
the amount
At
its last
last venture
venture round,
round, GlobeImmune’s
GlobeImmune’s share
share price
price was
was $11.26,
$11.26, already
already in
in the
the
At its
middle
of
its
IPO
filing
range
of
$11-$13.
For
Regulus,
its
prior
venture
round
middle of its IPO filing range of $11-$13. For Regulus, its prior venture round
was
at $8,
$8, while
while its
its filing
filing range
range is
is $10-$12.
$10-$12.
was at
With an average discount this year of 25% below the
the middle
middle of
of that
that proposed
proposed
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Subjects
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Deals & Dealmaking
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Strategies
Strategies
Financial Strategies
Strategies
Financial
Industries
Industries
Financial
Financial
Venture Capital
Capital
Venture
Private Equity
Equity
Private
Investment
Banks
Investment Banks
Regions
Regions
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United States
States
United
Companies
Companies
Tesaro Inc.
Inc.
Tesaro
GlobeImmune
Inc.
GlobeImmune Inc.
Regulus Therapeutic
Therapeuti
Regulus
Inc.
Inc.
Leerink Swann
Swann && Co
Co
Leerink
Sofinnova Ventures
Ventures
Sofinnova
Durata
Therapeutics
Durata Therapeutics
Hyperion Therapeuti
Therapeut
Hyperion
Inc.
Inc.
Supernus
Supernus
Pharmaceuticals Inc
Inc
Pharmaceuticals
Vivus
Inc.
Vivus Inc.
Pacira Pharmaceutic
Pharmaceuti
Pacira
Inc.
Inc.
NewLink Genetics
Genetics CC
NewLink
Merrimack
Merrimack
Pharmaceuticals Inc
Inc
Pharmaceuticals
ChemoCentryx Inc.
Inc.
ChemoCentryx
Sagent
Pharmaceut
Sagent Pharmaceuti
Inc.
Inc.
Oncomed
Oncomed
Pharmaceuticals Inc
Inc
Pharmaceuticals
Verastem Inc.
Inc.
Verastem
GlaxoSmithKline
PL
GlaxoSmithKline PLC
Sirtris Pharmaceutica
Pharmaceutic
Sirtris
Inc.
Inc.
Aisling Capital
Capital
Aisling
fundamental appeal of the drug, the prior success of the management team and
the amount
supporting
company
that largely
the valuation.
Not
only are
areof
lifecapital
sciences
VCs not
notthe
seeing
step-up
at most
mostset
IPOs,
they usually
usually
Not
only
life
sciences
VCs
seeing
aa step-up
at
IPOs,
they
aren’t during
during later
later venture
venture rounds
rounds either.
either.
aren’t
At its last venture round, GlobeImmune’s share price was $11.26, already in the
middle of its IPO filing range of $11-$13. For Regulus, its prior venture round
was at $8, while its filing range is $10-$12.
Close-Up: Step-Ups On
Private Rounds
With an average discount this year of 25% below the middle of that proposed
range, neither seems likely to get much, if any, step-up at IPO. Still, that
discount actually is an improvement on the almost 40% average discount for
Later venture
venture rounds
rounds for
for life
life
Later
Capital
last year’s class of IPOs, according to an analysis
of data from BMO
sciences companies
companies have
have
sciences
Markets.
provided little
little valuation
valuation
provided
increase, while
while earlier
earlier rounds
rounds
increase,
“There was a period where the step-ups were
much higher.
Around 2000, they
have
offered
much
more
offered much
moremodest,”
were impressive. But in the last few years have
the step-ups
were very
significant
step-ups.
significant
step-ups.
noted a banker who asked to remain anonymous.
“VCs
can’t sell not only
because they’re in a lock-up period and there’s no liquidity, but also because
they haven’t made their target returns yet.”See
See sidebar
sidebar at
at end
end of
of article
article
Not only are life sciences VCs not seeing a step-up at most IPOs, they usually
aren’t during later venture rounds either.
Insider support
support from
from venture
venture capital
capital investors
investors of
of the
the IPO,
IPO, now
now typically
typically in
in the
the
Insider
20%-40% range
range for
for life
life sciences
sciences IPOs,
IPOs, is
is not
not
only often
oftenStep-Ups
necessary On
to get
get the
the
20%-40%
only
necessary
to
Close-Up:
financing done
done –– but
but VCs
VCs also
also are
are hoping
hoping for
for
greater
gains down
down the
the road
road ("In
("In
financing
greater
gains
Private
Rounds
2012, Biotech
Biotech IPOs
IPOs Continue
Continue Their
Their Inside
Inside Story"
Story" —
— START-UP,
START-UP,February
February 2012).
2012).
2012,
“As the
the round-to-round
round-to-round step-ups
step-ups in
in private
private financings
financings have
have decreased
decreased over time,
“As
Later venture
rounds for life over time,
venture funds
funds increased
increased their
their participation
participation in
in public
public financings
financings to maintain
maintain or
or
venture
sciences
companiestohave
gain ownership
ownership when
when subsequent
subsequent milestones
milestones will
will drive
drive aa reasonable
reasonable portion of
gain
provided
little valuation portion of
Ventures said.
said.
their returns,”
returns,” James
James Healy
Healy of
of Sofinnova
Sofinnova Ventures
their
increase, while earlier rounds
have offered much more
Healy said
said an
an undisclosed
undisclosed life
life sciences
sciences Sofinnova
Sofinnova portfolio
portfolio company
company plans
plans to
to
Healy
significant step-ups.
file for
for an
an IPO
IPO shortly.
shortly. The
The firm
firm was
was aa VC
VC in
in two
two 2012
2012 IPO
IPO companies:
companies: infectious
infectious
file
Therapeutics Inc.
Inc. and
and orphan
orphan disease
disease and
and hepatology
hepatology
disease company
company Durata
Durata Therapeutics
disease
See
sidebar
at
end
of
article
play Hyperion
Hyperion Therapeutics
Therapeutics Inc.
Inc. Sofinnova
Sofinnova also
also came
came into
into the
the Tesaro
Tesaro IPO
IPO as
as aa
play
new investor.
investor.
new
Pricing an
an IPO
IPO too
too high
high can
can have
have aa long-term
long-term negative
negative effect,
effect, Healy
Healy suggested.
suggested.
Pricing
Part of
of Sofinnova’s strategy
strategy is to
to plan
plan to
to hold
hold IPO
IPO shares
shares at least
least until
until aa
Part
Insider Sofinnova’s
support from ventureiscapital
investors
of the IPO, at
now typically
in the
company can
can reach
reach aa major
major inflection
inflection point
point on
on the
the public
public markets.
markets.
company
20%-40% range for life sciences IPOs, is not only often necessary to get the
financing done – but VCs also are hoping for greater gains down the road ("In
"It requires
requires balance
balance and
and perspective
perspective as
as aa private
private investor
investor in
in order
order to
to both
both retain
retain
"It
2012, Biotech IPOs Continue Their Inside Story" — START-UP,February 2012).
ownership and
and maximize
maximize overall
overall returns
returns during
during an
an IPO.
IPO. As
As aa result,
result, one
one must
must
ownership
share the
the upside
upside with
with new
new public
public investors.
investors. One
One needs
needs to
to maintain
maintain aa highhighshare
“As the round-to-round step-ups in private financings have decreased over time,
quality book
book so
so aa stock
stock trades
trades well
well after
after pricing.
pricing. IfIf the
the price
price is
is too
too high
high itit may
may
quality
venture funds increased their participation in public financings to maintain or
have aa negative
negative impact
impact on
on demand
demand and
and trading.
trading. In
In the
the long
long term,
term, higher
higher initial
initial
have
gain ownership when subsequent milestones will drive a reasonable portion of
stock
prices
are
not
always
better."
stock prices are not always better."
their returns,” James Healy of Sofinnova Ventures said.
Healy said an undisclosed life sciences Sofinnova portfolio company plans to
file for an IPO shortly. The firm was a VC in two 2012 IPO companies: infectious
disease company Durata Therapeutics Inc. and orphan disease and hepatology
Inc.
Aisling Capital
Step-ups
Step-ups are
are simply
simply no
no longer
longer automatically
automatically aa part
part of
of the
the equation,
equation, as
as
sophisticated
public
investors
build
their
valuation
models
from
the
bottom
sophisticated public investors build their valuation models from the bottom up.
up.
James
James Boylan
Boylan of
of Leerink
Leerink noted
noted that
that as
as late
late as
as 2007
2007 “one
“one of
of the
the valuation
valuation
metrics
metrics was
was step-up
step-up to
to the
the last
last private
private round,
round, as
as long
long as
as itit had
had priced
priced more
more than
than
three
months
earlier.
But
now
the
buyside
is
much
less
focused
on
any
three months earlier. But now the buyside is much less focused on any
valuation
valuation implicit
implicit in
in the
the prior
prior financing.
financing. We’re
We’re living
living in
in aa world
world where
where it’s
it’s less
less
about
step-ups
and
more
about
fundamental
analysis
and
valuation.”
about step-ups and more about fundamental analysis and valuation.”
How
How IPOs
IPOs Get
Get A
A Leg
Leg Up
Up
After-market
After-market performance
performance for
for the
the U.S.
U.S. biotech
biotech IPO
IPO class
class of
of 2012
2012 hasn’t
hasn’t been
been
quite
quite as
as poor
poor as
as in
in prior
prior years;
years; 38%
38% were
were underwater
underwater from
from their
their IPO
IPO offer
offer price
price
at
Aug.
31.
For
the
2011
IPOs,
that
share
is
44%
and
for
the
2010
IPOs,
it’s
at Aug. 31. For the 2011 IPOs, that share is 44% and for the 2010 IPOs, it’s
61%.
61%.
Still,
Still, the
the high-fliers
high-fliers remain
remain few
few and
and far
far between.
between. Since
Since 2007,
2007, there
there have
have been
been
only
three
IPOs
that
had
more
than
doubled
their
offer
prices
by
Aug.
only three IPOs that had more than doubled their offer prices by Aug. 31.
31. One
One
Pharmaceuticals
Inc.,
was
an
IPO
this
year
for
specialty
CNS
play
Supernus
was an IPO this year for specialty CNS play Supernus Pharmaceuticals Inc.,
which
TrokendiXR
which was
was up
up 146%
146% after
after receiving
receiving aa tentative
tentative FDA
FDA approval
approval for
for TrokendiXR
(extended-release
topiramate)
to
treat
epilepsy.
Speculation
around
(extended-release topiramate) to treat epilepsy. Speculation around this
this
company
heated
up
because
Trokendi
XR
is
similar
to
a
component
company heated up because Trokendi XR is similar to a component in
in recently
recently
Qsymia
(phentermine/topiramate)
from
Vivus
approved
weight-loss
drug
Inc.
approved weight-loss drug Qsymia (phentermine/topiramate) from Vivus Inc.
The
The other
other two
two were
were 2011
2011 IPOs:
IPOs: pain
pain play
play Pacira
Pacira Pharmaceuticals
Pharmaceuticals Inc.
Inc. and
and
immunotherapy
immunotherapy company
company NewLink
NewLink Genetics
Genetics Corp.
Corp. NewLink
NewLink presented
presented positive
positive
Phase
Phase IIII overall
overall survival
survival data
data for
for its
its product
product HyperAcute
HyperAcute Pancreas
Pancreas in
in pancreatic
pancreatic
cancer
at
the
American
Society
of
Clinical
Oncology
conference
in
June.
cancer at the American Society of Clinical Oncology conference in June. Pacira
Pacira
gained
on
a
health
economics
analysis
of
opioid-related
adverse
drug
events
gained on a health economics analysis of opioid-related adverse drug events
that
Exparel (liposomal
(liposomal bupivacaine),
bupivacaine), which
which was
was approved
approved
that made
made the
the case
case for
for its
its Exparel
late
last
year
for
postsurgical
anesthesia,
and
on
positive
second
quarter
late last year for postsurgical anesthesia, and on positive second quarter
earnings.
earnings.
All
All three
three of
of these
these IPOs
IPOs priced
priced well
well below
below their
their proposed
proposed ranges
ranges with
with single-digit
single-digit
share
prices
and
valuations
below
$150
million,
giving
them
plenty
of
share prices and valuations below $150 million, giving them plenty of room
room to
to
run
on
good
news.
run on good news.
IPO
IPO valuations
valuations have
have been
been edging
edging up
up as
as well,
well, as
as more
more companies
companies go
go public
public that
that
are
perceived
to
be
of
higher
quality.
This
year,
three
of
the
eight
IPOs
have
are perceived to be of higher quality. This year, three of the eight IPOs have
had
had valuations
valuations exceeding
exceeding $300
$300 million.
million. All
All of
of them
them were
were clinical-stage
clinical-stage cancer
cancer
Pharmaceuticals
Inc.,ChemoCentryx
Inc.
and
Tesaro.
plays:
Merrimack
Last
plays: Merrimack Pharmaceuticals Inc.,ChemoCentryx Inc. and Tesaro. Last
year,
only
one
IPO
worth
more
than
$300
million
made
it
out
–
specialty
year, only one IPO worth more than $300 million made it out – specialty pharma
pharma
Pharmaceuticals
Inc.,which
already
had
substantial
revenues.
company
Sagent
company Sagent Pharmaceuticals Inc.,which already had substantial revenues.
In
In the
the IPO
IPO queue,
queue, another
another clinical-stage
clinical-stage cancer
cancer company
company OncoMed
OncoMed
Pharmaceuticals
Inc.
seems
likely
to
have
a
valuation
over
Pharmaceuticals Inc. seems likely to have a valuation over $300
$300 million
million
once
it
goes
public
("The
Hype
And
Hope
Of
Cancer
Stem
Cell
Therapeutics"
once it goes public ("The Hype And Hope Of Cancer Stem Cell Therapeutics" —
—
START-UP,
May
2012).
START-UP,May 2012).
Gauging
Gauging Investor
Investor Interest
Interest
START-UP,May 2012).
Gauging Investor Interest
“The performance we are seeing in the sector as measured by the Nasdaq
Biotech Index (NBI) and Amex Biotech Index (BTK) is adding to the breadth and
diversity of IPO investors and the quantity of assets being invested in these
IPOs. That’s helping out both the viability and valuations of IPOs this year,” said
Leerink’s Chaudhary.
The NBI is up more than 55% since mid-December, while the BTK has added
more
more than
than 45%.
45%. By
By comparison,
comparison, the
the Dow
Dow Jones
Jones Index
Index has
has gained
gained only
only about
about
20%
and
the
S&P
500
Index
has
increased
by
around
15%.
20% and the S&P 500 Index has increased by around 15%.
Chaudhary
Inc. was
was the
the first
first IPO
IPO for
for
Chaudhary also
also noted
noted that
that the
the 2012
2012 IPO
IPO for
for Verastem
Verastem Inc.
a
a preclinical
preclinical company
company since
since it’s
it’s founder
founder Chris
Chris Westphal’s
Westphal’s earlier
earlier company
company Sirtris
Sirtris
Pharmaceuticals
Pharmaceuticals Inc.
Inc. in
in 2007("Verastem
2007("Verastem Joins
Joins The
The Public
Public Markets
Markets With
With A
A
Strong
Strong IPO"
IPO" —
— "The
"The Pink
Pink Sheet"
Sheet" DAILY,
DAILY,Jan.
Jan. 27,
27, 2012).
2012).
“The
“The window
window is
is open
open and
and continues
continues to
to get
get better
better as
as higher
higher quality
quality companies
companies
come
to
market,”
he
added.
come to market,” he added.
He
He said
said the
the number
number of
of public
public biotech
biotech investors
investors willing
willing to
to invest
invest in
in a
a biotech
biotech IPO
IPO
has
grown
to
50
or
60,
from
only
about
30
as
recently
as
early
2011.
has grown to 50 or 60, from only about 30 as recently as early 2011.
He
He noted
noted that
that the
the current
current group
group of
of investors
investors still
still includes
includes the
the core
core of
of Boston
Boston and
and
New
York-based
investors
from
a
few
years
ago,
but
it’s
also
added
in
investors
New York-based investors from a few years ago, but it’s also added in investors
from
from other
other geographies
geographies that
that had
had been
been dormant
dormant since
since 2007.
2007. The
The number
number of
of VCs
VCs
Capital
that
are
willing
to
put
a
lot
of
money
into
IPO
companies,
like
Aisling
and
that are willing to put a lot of money into IPO companies, like Aisling Capital and
Sofinnova
Ventures,
also
has
grown.
“They
are
adapting
their
model
and
Sofinnova Ventures, also has grown. “They are adapting their model and
looking
looking to
to deploy
deploy assets
assets in
in a
a purely
purely public
public manner.
manner. That
That gives
gives us
us a
a better
better ability
ability
to
to add
add price
price tension
tension into
into the
the book,”
book,” he
he concluded.
concluded.
On
On the
the IPO
IPO side,
side, Chaudhary
Chaudhary expects
expects about
about five
five to
to seven
seven biotech
biotech IPOs
IPOs will
will price
price
in
in the
the remainder
remainder of
of 2012,
2012, which
which he
he sees
sees as
as a
a pretty
pretty healthy
healthy clip.
clip. He
He noted
noted it’s
it’s
difficult
difficult to
to quantify
quantify possible
possible IPOs
IPOs now
now that
that issuers
issuers have
have started
started taking
taking
advantage
of
confidential
S-1
filings
for
an
IPO
with
the
Securities
advantage of confidential S-1 filings for an IPO with the Securities and
and
Exchange
Commission
after
the
Jumpstart
Our
Business
Startups
Exchange Commission after the Jumpstart Our Business Startups (JOBS)
(JOBS) Act
Act
was
signed
into
law
in
April.
was signed into law in April.
A
A confidential
confidential S-1
S-1 is
is useful
useful for
for a
a company
company that’s
that’s in
in the
the middle
middle of
of a
a strategic
strategic
dialogue
that
might
be
weakened
by
knowledge
of
an
IPO
or
that
can
dialogue that might be weakened by knowledge of an IPO or that can be
be more
more
patient
and
can
then
wait
for
optimal
market
conditions
without
an
offering
patient and can then wait for optimal market conditions without an offering being
being
perceived
perceived as
as a
a stale
stale IPO,
IPO, he
he said.
said.
Chaudhary
Chaudhary said
said none
none of
of the
the IPOs
IPOs Leerink
Leerink has
has completed
completed this
this year
year were
were
originally
off
confidential
S-1
filings.
originally off confidential S-1 filings.
Leerink
Leerink has
has led
led most
most of
of the
the health
health care
care IPOs
IPOs during
during the
the three
three years
years since
since the
the
team
moved
to
the
health
care
boutique
bank
from
bulge
bracket
bank
Merrill
team moved to the health care boutique bank from bulge bracket bank Merrill
Lynch,
Lynch, Leerink’s
Leerink’s Boylan
Boylan noted.
noted. He
He said
said Leerink
Leerink has
has been
been the
the lead
lead underwriter
underwriter
on
on a
a dozen
dozen therapeutics
therapeutics IPOs
IPOs during
during that
that time,
time, five
five of
of which
which were
were this
this year.
year.