INSUBCONTINENT EXCLUSIVE:
For people who make investment decisions based on revenues and projected earnings, biotech IPOs are kind of a non-starter
Not only are new market entrants universally unprofitable, most have zero revenue
Going public is mostly a means to raise money for clinical trials, with red ink expected for years to come.That pattern may be one reason
the venture capital press,Crunchbase Newsincluded, tends to devote a disproportionately small portion of coverage to biotech IPOs
It more exciting to watch a big-name internet companypopin first-day trading orpoke funat an underperforming dud.But with our fixation on
all things tech, we&re missing out on the big picture
There are actually a lot more biotech and healthcare startup IPOs than tech offerings
In the second quarter of this year, for instance, at least 16 U.S
venture-backed biotech and healthcare companies went public, compared to just 11 tech startups
In three of the past four years, bio offerings outnumbered tech IPOs, according to Crunchbase data.In the following analysis, we attempt to
get up to speed on the pace of biotech offerings, assess where we are in the cycle and spotlight some of the rising stars.Biotech outpaces
techAs mentioned above, U.S
bio IPOs outnumber tech offerings in most years
However, the bio cohort raises less total capital, partly because the largest technology IPOs tend to be much bigger than the largest bio
In the chart below, we compare the two sectors over the past four years.Globally, the numbers are much higher
Using Crunchbase data, we&ve put together a chart looking at global VC-backed biotech and healthcare IPOs over the past four years
While we&re just over halfway through 2018, biotech and health IPOs have already raised more money than in any of the prior three full
calendar years.Fundamentals driven, cycle amplifiedIt pretty clear we&re in an upcycle for all things startup-related
VCs are flush with cash, late-stage rounds are ballooning in size and IPO and MA action is picking up, too.So what does that mean for bio
IPOs Is the uptick in the pace and size of offerings mostly a result of bullish market conditions Or is the current slate of pre-IPO
candidates more compelling than in the pastWe turned to Bob Nelsen, co-founder ofARCH Venture Partners, one of the top-performing biotech
investors, for his take, which is that it a &fundamentals driven, cycle amplified& IPO boomlet.More companies are launching well-received
IPOs because the pace of startup innovation is faster than in the past
Nelson calls it &the result of the previous 30 years of investment and innovation in biotech that has finally led to essentially data-driven
innovation.& That leading to more curative treatments, disease-modifying therapies and preventative technologies.Yet we&re also in a bullish
segment of the market cycle for biotech
That prompting companies that might have stayed private under other conditions to give going public a shot
It also providing bigger outcomes for emerging companies that were already on the IPO track.The latest example of a big outcome IPO isRubius
Therapeutics, which develops drugs based on genetically engineered red blood cells
This week, the five-year-old company raised $241 million at an initial valuation of over $2 billion, making it the largest bio offering of
company, which previously raised nearly a quarter-billion-dollars in venture funding, is still in the pre-clinical trial phase.This year has
delivered several other good-sized offerings as well, including drug developersEidos TherapeuticsandHomology Medicines, recently valued
around $800 million each, along withTricida, valued around $1.2 billion
(See the full list of 2018 global bio and health offeringshere.)As for aftermarket performance, that been up and down, but includes some big
Last year, biotech led the pack for best-performing IPOs on U.S
The sector accounted for four of the six top spots, according to Renaissance Capital, led by drug developersAnaptysBio,Argenx andUroGen,
along withCalyxt, an agbio startup.Looking aheadWhile things are already up, bio VCs, generally an optimistic bunch, see several reasons why
bio IPOs could go higher.Nelson points to what he sees as the lagging pace of in-house innovation at big pharma and biotech players
Increasingly, they need to acquire startups and recently public companies to stay competitive and build out new product pipelines.There is
also tons of fresh capital earmarked for healthcare startups
in 2017, healthcare-focused venture capitalists raised $9.1 billion
That figure was up 26 percent from 2016, per Silicon Valley Bank.More dollars also are flowing from venture firms that invest in a mix of
tech and life sciences through a single fund
That list includes well-established VCs with dry powder to invest, includingPolaris Partners,Founders Fund,Kleiner Perkins andSequoia
Capital.Still, Nelson observes, deep into an IPO bull market, the average quality of offerings does tend to decline
That said, he been through similar inflection points in previous cycles and &for the same point in the cycle, the quality is markedly
