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New Year’s Biotech IPO Boom?

January was a profitable month for biotech companies going public, Burrill & Company says.

By | February 3, 2014

New York Stock ExchangeWIKIMEDIA, ARUN DE JOEThe first 31 days of 2014 were fruitful for biotech companies going public, according to the financial services firm Burrill & Company. In a statement, the firm noted that six life-sciences companies completed public offerings last month, raising a total of $439 million. Last year was also strong for biotech initial public offerings (IPOs), with six companies completing them in September alone.

“The strong start for biotech IPOs in 2014 reflects broad interest in the sector and the fact that biotech is outperforming the general markets,” CEO G. Steven Burrill said in the statement. “The enthusiasm at this year’s J.P. Morgan Healthcare Conference has refueled momentum in the sector and companies are seeking to take advantage of Wall Street’s still open arms.”

But while the biotech IPO drought of years past may have ended, experts warn that the perceived boom might not last. “In some cases, there may be examples of companies that succeed in getting an IPO done that perhaps wouldn’t have done were it not for that bubble-like herd behavior [of investors],” David Grainger, a partner at Index Ventures in London, told The Scientist last August. “And if those companies then crash . . . then there’s a danger we will flip from the current headlong rush back into the bust state.”

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Avatar of: Paul Stein

Paul Stein

Posts: 109

February 4, 2014

Following close behind the biotech IPO boom will be the one involving medical devices.  Medical devices have always been attractive with their lack of compliance issues, relatively low cost per treatment-day, and significantly faster regulatory pathway compared to pharmaceuticals and biologicals.  Even with a terrific product, however, Recession and post-Recession funding has been exceedingly difficult when trying to attract the previously semi-eager angel and venture capital investors.  With those folks no longer on the scene, going directly to the public, through crowdfunding or IPO's, is the logical way to go.

Avatar of: Ed Berger

Ed Berger

Posts: 1

February 5, 2014

Would that it were so.  We need to consider why, if devices offer so many advantages, the IPOD window opened for biotech first.  For one thing, devices are quite tightly regulated, and investors remain queasy about FDA unpredictability.  For another, while the timeline for regulatory approval is shorter than for drugs, so is a product's commercial life - typically about 5 years.  This substantially constrains financial upside. Then there is reimbursement - less flexible and more systemically constrained than for drugs.  And finally, very important for IPO prospects, there is just very little "romance" associated with device innovation - a bad rap, and a dumb rationale for investment, but not to be underestimated.

Avatar of: Tilton

Tilton

Posts: 1

February 5, 2014

But when new players from other industries start entering the field - especially ones like Apple: http://bits.blogs.nytimes.com/2014/01/31/apple-meets-with-f-d-a-regulators-for-mobile-medical-applications/, then one can see a full range of possibilites and potential.

Avatar of: KaraR

KaraR

Posts: 2

March 7, 2014

Hi Agree with Paul Stein.

Ed, I am not sure about your background in the life science business. I have been in the industry for over 20 years. The IPO trend Biotech/Med devices is opposite. 2011 to 2013 saw a surge of pharm and biotech IPOs. If you attend the JP Morgan Health Care conference. In 2008 -2010  we witnessed biotech CEOs literally begging for meetings and wanting to showcase thier technology to raise capital. A few bankers took notice and created this huge wave of IPOs. The idea was to fund these pre-revenue companies.

Now, Biotech IPOs has become trend. Revenue or not you can go IPO. Biotech sector has a very horendous regulatory path. If you sit down with the CEOs one on one, they will tell you that the FDA approval is very far fetched target because of the process of obtaining approval. Now if you look at 2004, there were 23 med device companies that filed IPO vs 13 biotech.

The trend is now reversing. In 2014, the investors are seeing that the med devices have a better regulatory pathway, the price per product is high. However, deals are smaller than drug deals, cost to commercialization is small. So the opportunity for quick turnaround is faster for an investor. Investors are realizing the opportunity. As medical device market out side US expands many fold and obesity crisis hits all emerging countries, IB  and analyst are exploring new wave of medical devices qualified for IPO filings, more medical device IPO have been filed in the recent past. Just this year: Biomet, Lumenis and Quotient from UK have filed for IPO in the US.

I hope this helps. Great comments Paul!

 

 

Avatar of: KaraR

KaraR

Posts: 2

March 7, 2014

I am very bullish about medical devices treating obesity and diabetes.

I think these companies will draw very high valuations when they file for IPO.

 

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