Three clinical-stage biotechs, three upsized offerings and three first-day share spikes.
Last Friday’s biotech IPO tripleheader was a multiyear rarity for an industry still grasping for a more lively opening of the public markets, but the rosy scene doesn’t portend a quick return to greener pastures.
Kevin EiseleThe three upsizings from Bicara Therapeutics, Zenas BioPharma and MBX Biosciences could be a sign that “there is pent-up demand in the system for high-quality stories,” Kevin Eisele, a managing director on the equity capital markets team at William Blair, said in an email to Endpoints News.
Oncology biotech Bicara $BCAX raised $315 million, late-stage autoimmune drug developer Zenas $ZBIO nabbed $225 million and endocrine company MBX $MBX snagged $163 million. They ended their first day on Nasdaq up 30%, 6.7% and 47.8%, respectively.
“While the recent biotech IPO triplet was very successful, I think that there continues to be some restraint when it comes to IPO proceeds and valuations,” Daniel Parisotto, managing director of healthcare investment banking at Oppenheimer & Co, said in an email. “Nobody wants to squeeze the lemon to the fullest extent. Getting IPOs done will get easier, but longer-term aftermarket performance is the key metric for success and nobody wants to potentially underdeliver. Better optics are to upsize and trade up than the opposite happening.”
Another biotech, BioAge, is likely to go public in the coming weeks after revealing its IPO pitch earlier this month. Beyond that, no other biotech startups have publicly unveiled their S-1 filings, but multiple companies have reportedly flirted with an IPO over the past few months.
Daniel Parisotto“It’s my sense that public market investors have renewed appetite for novel public market stories after having picked over the same stories for the last 2.5 years,” Parisotto said. “However, there is plenty of trading in and out of the recent IPOs and we have yet to see how sticky those investors will be over the next few days and weeks.”
Anna Fan, a senior partner on the Novo Holdings venture investments team, said in an email that the funding environment is still tough. Novo Holdings is an active investor in both IPOs and private rounds. Many startups will run dual-track processes and get bought out before they can make the public flip. She pointed to ProfoundBio and Amolyt Pharma from this spring as examples.
“Support from existing investors are table stakes, and we need to see strong demand from new investors for IPOs to perform well,” Fan said.
Rate cuts, generalists and an election
The US Federal Reserve is expected to make the first interest rate cuts in years later this month, which could provide some momentum for private biotechs looking to go public. Eisele noted the conditions could “improve once the Fed begins to cut rates.”
Another key barometer for a broader biotech IPO surge is the level of general investor interest.
Anna Fan“Investors are sitting on the sidelines and the strength in AI and semiconductors are taking away generalists’ interest,” Fan said.
The US presidential election is also on the horizon. It’s not causing too much concern for investors, Fan said, but “most private companies are cognizant of not going public too close to November.”
In the end, the quality of a company is always paramount.
Unlike the IPO heyday of 2020 and early 2021, biotechs no longer need a deep pipeline or boast of a platform to secure major funds “as long as there’s a compelling clinical/commercial story behind it,” Eisele said.