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8 Biotech IPOs Delayed by the Government Shutdown

The delays could cause companies to seek alternative financing and put development pipelines on hold.

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.”

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As the markets put the debt ceiling debacle in the rearview mirror, more than a few issues remain open.