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Biotech IPOs Raise Record Amount of $8.65 Billion in 2018

80 deals created $44.8 billion of market value for newly public US biotechs (Image: Genomics Law Report).

Given that we witnessed the largest ever US initial public offering for a biotechnology company this past year, it’s no surprise that 2018 set a record for proceeds raised in the industry. 80 IPOs raised a total of $8.65 billion in gross proceeds, including all overallotment options exercised by underwriters, creating $44.79 billion of market value. The deal activity was highlighted by Moderna’s $604 million offering in early December that valued the company at $7.57 billion post-money. We discussed our issues about that deal in this space a few weeks before it priced, but the transaction clearly showed that the appetite for investing in the promise of new therapeutics is as strong as it’s ever been.

There were other large offerings by biotech unicorns in addition to Moderna, with six other IPOs breaching the $1 billion market valuation level. Notably, Allogene Therapeutics ALLO raised $373 million in October, at a valuation of $2.12 billion; Rubius Therapeutics RUBY raised $277 million in July, at a $1.81 billion; and Guardant Health GH raised $273 million in October at a valuation of $1.62 billion.

Companies were able to raise large amounts of equity capital in 2018, with the median offering size at $88 million with a $379 million market cap. Only 16 out of the 80 deals were less than $50 million in size, as companies and their bankers took full advantage of the financing window that was open for much of the year.

The performance in the aftermarket of biotech IPOs was essentially flat by year end. If an investor managed to put an equal amount of money in each of the deals, the return through last Friday, Dec. 28, was only 0.41%, with only 33 out of the 80 deals trading above their IPO price. Though the total return does compare favorably on a relative basis with broader indices, the 47 deals trading at or below their IPO price serve as a reminder that IPO investing generally, and biotech IPO investing in particular, is not for the faint of heart.

2018 has certainly not been without its significant winners, however, as several deals have paid off handsomely for investors fortunate enough to get an allocation. The happiest investors by far were those in Tilray TLRY, the Canadian pharmaceutical and cannabis company, whose stock is up 342% since its July IPO. Investors in ARMO Biosciences were rewarded with a rapid 194% return when Lilly LLY acquired the company in June for $50 per share, just five months after its January IPO at $17 per share. Allakos Therapeutics ALLK has returned 191% to investors since its July IPO.

Given the turmoil in global markets and the geopolitical uncertainty that seems to be at fever pitch, we anticipate that 2019 won’t present as favorable a financing climate for biotechs as this past year has. There are several deals already in the pipeline at the SEC, however, and will be here to discuss the most interesting candidates as always. We thank you for your readership, and we wish you all a happy, healthy, prosperous new year!

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