8 Biotech IPOs Delayed by the Government Shutdown

Edward Kim  |

As we highlighted yesterday, the government shutdown has now lasted three full weeks, with today marking the first paychecks missed by the federal employees who have been furloughed. According to Carmin Chappell and John W. Schoen of CNBC , the Center for American Progress calculates the total amount of missed checks today to be $2.2 billion. The impact of the absence of those checks will clearly translate to a loss in consumer spending that will be felt in the broader economy. The official unemployment numbers may also be affected, depending on how these furloughed workers are counted.

We discussed the impact at the FDA and at the SEC previously, and we focus today on the convergence of these agencies. At least 26 companies have filed to go public since the beginning of December 2018, of which at least eight are biopharmaceutical companies. As Corrie Driebusch, Maureen Farrell and Dave Michaels wrote in The Wall Street Journal this week, "It now looks likely that no major company will tap the U.S. IPO market this month." It would be only the fourth time since 1995 that a January would pass without any new issue activity.

The Journal writers elaborated further that "biotech firms could be put in the most perilous position by the closure of the SEC," as they lack the robust cash balances of some of the technology unicorns that can afford to bide their time. Alan Denenberg, partner and head of the Northern California office of Davis Polk & Wardwell, the third ranked IPO law firm in 2018 according to Renaissance Capital, told the Journal that many biotech firms and small health-care companies are already looking for alternatives to an IPO in case the shutdown lasts longer than a month."

The eight biotechnology companies that have filed with the SEC since December are seeking to raise over $900 million, enabling them to advance their therapeutic pipelines, hire more scientists and other employees, and help their communities flourish. All that will have to wait in the best of cases, while some may face dimmer outcomes if this shutdown continues.

A study by IHS concluded that 92% of a company's job growth occurs after it becomes a public company. Moreover, Enrico Moretti, PhD, the Michael Peevy and Donald Vial Professor of Economics at the University of California, Berkeley, in his groundbreaking research on the impact of the growth of the technology-driven economy, concluded that for every scientific or engineering job created in what he calls "brain hubs" such as San Francisco, Boston and Durham, five local service jobs are created, raising salaries and standard of living for everyone in the communities.

Federal workers are suffering, as are entrepreneurs, innovators, employees and entire communities, with each day that this shutdown is allowed—enabledto continue. It's not often that we agree with Peggy Noonan, but as she wrote last night in The Wall Street Journal, we urge this administration and Congress to "End This Stupid Shutdown."


Please email us at content@equities.com to see our Case Studies and Testimonials.

Please click here for information on our equity trading platform.

Please click here to receive our free daily newsletter.

DISCLOSURE: The author has no positions or any beneficial interest in, and has received no compensation from, the companies mentioned in this article.


The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Comments

Watchlist

Symbol Last Price Change % Change
AAPL

     
AMZN

     
HD

     
JPM

     
IBM

     
BA

     
WMT

     
DIS

     
XOM

     

What Is Petrolithium?

MGX Minerals explains the advantages of petrolithium and how they are helping to solve future problems today.

Emerging Growth

Permanent Techs Inc

Permanent Technologies Inc engages in the design and manufacture of multi-faceted, vibration-proof, self-locking nut and bolt systems for use in the fastener industry in the United States. The Company also…