Two Biotechs Set Out to End Sector’s IPO Drought
Wednesday, April 27, 2022
- HilleVax and Belite Bio this week will attempt to become the first biotechnology companies to go public in almost two months.
- HilleVax aims to raise about $175 million to back the development of a norovirus vaccine licensed from Takeda in what would be one of the sector’s largest new stock offerings this year. Belite Bio, whose experimental eye drug is in advanced testing, anticipates raising about $36 million in proceeds.
- Both companies expect to price their initial public offerings Thursday evening and on Friday begin trading on the Nasdaq. The post-IPO share prices of newly public biotechs have plummeted over the last few quarters amid the sector’s downturn, leading to a slowing of new stock offerings that’s now affecting startups.
The first two potential biotech IPOs since early March represent a key test for a struggling sector.
After a multiyear boom that culminated in 2021 with a record 104 IPOs, the pace of new biotech offerings has stagnated. Data compiled by BioPharma Dive show that the number of IPOs has declined each of the last three quarters, with nine pricing in the first three months of 2022 versus 33 in the same period a year ago. The average amount of money raised through those IPOs has fallen by almost half, from $146 million to about $83 million.
In some ways, 2022’s early results represent a reversion to pre-pandemic norms as both the number of IPOs and the $744 million raised are close to what biotechs accrued in the first quarters of 2019 and 2018. Still, of the nine biotechs that have entered the public market this year, all but one, a micro-cap cancer biotech called Nuvectis Pharma, trade at or below their IPO price, as do about 90% of those that priced new offerings last year.
There are multiple reasons for the slump, from macro-economic forces to company-specific problems.
For example, clinical setbacks at several newly public biotechs has hurt sentiment. Investors also have become less willing to support the lofty valuations biotechs had been seeking on the public markets, particularly among companies that are either preclinical or in Phase 1 testing. Such early-stage biotechs represented almost two-thirds of the sector’s IPOs in 2020 and 2021, as well as the bulk of those now trying to price their own offerings.
Still, those involved with biotech IPOs have expressed confidence that things could change if the pace of offerings normalizes or some of those who get to Wall Street perform well.
Jordan Saxe, the head of healthcare listing at Nasdaq, said earlier this month that more than 75 drug companies are in line for IPOs but have been waiting “until investors and banks are comfortable” taking those deals to market. The queue of those who have made their intentions public has grown steadily in recent weeks and now includes 15 companies, according to BioPharma Dive data.
HilleVax and Belite are the first of them to schedule offerings. Both companies have medicines that are in the later stages of clinical testing. HilleVax, formed through a collaboration between Takeda and the investment firm Frazier Healthcare Partners, has a norovirus vaccine that has already completed one Phase 2 trial and is getting set for another mid-stage test. Belite has a retinal disease medicine in Phase 3 studies.
If HilleVax hits its target and raises $175 million, its IPO would be the year’s third largest and the most substantial since Amylyx Pharmaceuticals’ $190 million offering in early January.