Biotechs Race to Go Public Ahead of Election

"Three drug developers went public on Friday, and their performance over the coming weeks will act as a barometer of investor interest in biotechnology initial public offerings.

Cancer drugmaker Bicara Therapeutics, MBX Biosciences, which develops treatments for endocrine and metabolic disorders, and immunology-focused Zenas BioPharma upsized their offerings and made their debuts on Nasdaq.

Boston-based Bicara increased its offering to 17.5 million shares from 14.7 million and went public at $18, the top of its expected range. MBX, based in Carmel, Ind., boosted its IPO to 10.2 million shares from 8.5 million, and also priced at the high end of its range, going public at $16.

Waltham, Mass.-based Zenas sold 13.2 million shares, up from more than 11.7 million, priced at $17, the midpoint of its expected range.

Bicara shares soared 30% above their initial price to close at $23.41 each. MBX's stock vaulted nearly 48% to close at $23.65, while Zenas shares closed at $18.15 each, a rise of 6.7%.

Biotech IPOs have rebounded this year, with 18 venture-backed startups going public in the U.S., equaling the total for all of 2023, according to market tracker PitchBook Data.

Activity was far stronger during, and just before, the pandemic. In 2019, 46 venture-backed biotechs came to market, followed by 67 in 2020 and 88 in 2021. The total crashed to 17 in 2022, according to PitchBook.

IPOs are vital to biotechs, as they need heavy funding to advance drugs through clinical trials, and venture capitalists can only fund these businesses for so long.

With few biotechs testing the waters in the past two years, many are now poised to come to market, among them BioAge Labs, an obesity drugmaker that recently divulged plans to go public.

Some biotechs aim to squeeze IPOs in before the presidential election, or else between Thanksgiving and Christmas. In general, IPO hopefuls would prefer to avoid the market volatility that could flare around the election. Once the election is over, the biotech IPO market could open even more, some investors said.

"Investors don't like uncertainty. You want to know what the next four years look like," said John McCallum, managing partner of investment firm JAM Capital Partners. "Getting the uncertainty of the next four years behind us will be constructive."

While many early stage biotechs went public during the IPO boom -- some of them companies with technology platforms for discovering new drugs, but none in clinical trials -- the three that made their debuts on Friday all have products in clinical studies.

And as the IPO market recovers, clinical-stage companies will have the best shot at home-run offerings because they present less risk and are more likely to be acquired in the near term, investors said.

"There's been a pretty meaningful shift away from the platform or preclinical companies," said Dr. Jim Healy, managing partner of biotech investor Sofinnova Investments.

Some market trends bode well for biotech IPOs: Small and midcap stocks in the sector have performed well this year, and top drug companies have been buying smaller biotechs. Also, a reset of private valuations over the past two years means companies going public now are less likely to do so at inflated prices, making them more attractive to buyers, investors said.

If despite these tailwinds biotech IPOs perform poorly in coming months, drugmakers seeking to follow them onto public exchanges could struggle." [1]

1. Biotechs Race to Go Public Ahead of Election. Gormley, Brian.  Wall Street Journal, Eastern edition; New York, N.Y.. 16 Sep 2024: B.4.