The Changing Profile of Biopharma IPOs

For at least the last twenty years, the profile of biopharmaceutical companies which have succeeded in making their public market debut has repeatedly cycled in a predictable pattern.  Investor enthusiasm in the sector, often driven by some highly visible breakthrough achievement, will continue to build with companies at earlier and earlier stages of development able to access the public markets.  The tide will then turn and almost overnight, if investors are receptive at all, their appetite will abruptly pivot to companies with significantly later-stage pipelines, if not approved drugs.  As we saw shortly after the beginning of the new millennium and again after the Great Recession, we find ourselves in a similar predicament today.  After the unprecedent biopharma IPO monsoon reached a crescendo in 2021, with nearly 100 new issues coming to market, the decline in sector interest has been swift and sharp.  Among the handful of companies that have managed to get out more recently, the majority have lead drug candidates in later-stage development.

The implications of this shift in sentiment are pronounced.  Earlier-stage and platform-oriented companies unable to access the public markets in the IPO wave that broke in 2021 cannot adjust their strategies fast enough to align with the changing market sentiment.  In consequence, these companies are going to be forced to turn to their existing investors for continued support.  Not only is this going to limit funds’ ability to participate in new company opportunities, it remains unclear just how long insider dollars can carry companies in the current portfolio.