Biotech IPOs: What The Hell Is Happening?
By Tim Fields
If you haven’t noticed, Biotech IPOs have been hitting the market with increasing volume over the past few months; there’s no argument, Biotech is back with a vengeance in this IPO market.
After about a 10 year flat line in regards to these IPOs, we’ve watched as 30 new firms have gone public and have raised over $2.5 billion.
Statistically, we’re looking at the 2nd busiest year in biotech in the 30+ year history of the sector in regards to the number of new offerings.
Why are they so incredibly hot?
We first have to take a step back.
For most of the past decade, investors haven’t given biotech much attention after the genomics bubble burst and definitely weren’t going to be jumping into any new offerings. Biotech, at that time, was considered to be too risky for its return potential.
However, since 2010, biotech, and in particular the NASDAQ Biotech Index, has massively outperformed other investment sectors – by over 100%.
The very obvious fact here with biotech is that IPO managers like Goldman Sachs have been reporting that these IPOs have been getting oversubscribed, a scenario that sells more shares than are available.
Recent IPOs have done very well in biotech. And it’s not just the big indices in biotech that have done well…
Many of the new offerings from the 2010-2012 season have delivered amazing returns; including Clovis, Tesaro, Intercept, Pacira, and Aegerion. These IPOs are all up 300-500% since their public debuts.
This is the trend, the baseline and it’s creating a major opportunity for us.
Now, keep in mind that not just any old biotech will perform and run you 100% in a few days; this isn’t the dot com boom. Yes, we’re in a trend – but luckily for this trend is selectively positioning only the strong, only the companies that have potential because of their earning or enormous upside.
A lot has changed in the past 13 years and fundamentals rule the market, followed by the trend… and biotech IS the trend now.