Biotech Sizzles in Public Markets

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While a lot of attention has been focused on the hot market for biotech IPOs, follow-on offerings by U.S. biotech companies are also sizzling. The numbers, though, may overstate the case.

This article published with permission from The Burrill Report.

While there has been a lot of attention focused on the hot market for biotech IPOs, follow-on offerings by U.S. biotech companies are also sizzling — up more than 70% this year — as the sector continues to outperform the broader market.

The numbers, though, may overstate the case. Thermo Fisher Scientific’s $2.5 billion follow-on to help finance its acquisition of Life Technologies represents the bulk of the increase. When that financing is excluded, capital raised by biotechs year-to-date through secondaries rose 6.6% compared to a year ago.

Overall, secondary offerings by public biotechs rose to $6.7 billion year-to-date as of July 19. That compares to the $3.9 billion raised during the same period a year ago. For this analysis, biotech companies include life sciences companies engaged in the development of therapeutics, diagnostics, life sciences tools and technology, and industrial and agricultural biotechnology.

This bodes well for the current crop of IPOs and the growing queue of companies announcing their plans to go public. In the past week, OncoMed Pharmaceuticals raised $81.6 million in an upsized offering priced above its target range, the second biotech company in a month to do so, the other one being Bluebird Bio. OncoMed soared at its debut, with shares up 58%. None of the 2012 class of nine managed to go public above their target range.

Many of the secondary offerings this year have been completed by companies that have recently gone public. Some 19 biotechs that have completed IPOs over the past three years accounted for $1 billion of the total raised so far this year. The more notable financings include Clovis Oncology’s $275 million secondary, Ironwood Pharmaceuticals’ $146 million secondary, and Tesaro’s nearly $100 million secondary.

Stemline Therapeutics, which completed its $69 million IPO at the end of January, added another $69 million to its coffers in a follow-on offering three and a half months later.

So far this year, 22 biotech companies (excluding Zoetis and Quintiles) have completed initial public offerings on U.S. exchanges to raise a total of $1.6 billion. That represents a 150% increase from the same time last year when just nine companies had completed initial public offerings to raise a total of $637 million.

With nine biotechs completing follow-on offerings in the last week and five biotechs set to price their IPOs in the next couple of weeks, 2013 may end up being the best year in a decade for raising capital in the public markets.