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However, the market’s response to these IPOs has been mixed. Only two of the eight biotechs that debuted in the third quarter, RayzeBio and Apogee (NASDAQ:APOG) Therapeutics, were trading above their debut share price as of Monday. Notably, Neumora Therapeutics, backed by Arch Venture Partners and Amgen (NASDAQ:AMGN), saw its share price drop by a third since its IPO on September 14.
In contrast to previous years, newly public drugmakers are not enjoying rising valuations as many companies that went public in 2020 and 2021 did. This reflects investor concerns about lack of data and a preference for safer bets amid economic uncertainty. Mike Perrone, a managing director at Baird, emphasized that investors now want to see strong proof of concept and a high-quality team before backing a company in the public markets.
A report from accounting and consulting firm EY noted a decline in “unicorn” IPOs – offerings involving companies valued at over $1 billion privately. As per EY’s findings, no health and life sciences companies to IPO through September 18 met this criteria in 2023, compared to four during the first three quarters of 2022.
Despite these challenges, there are signs that the fourth quarter could be busier. Three biotech firms – Lexeo Therapeutics, Abivax, and Kairos Pharma – filed plans to go public on Friday. All three have at least one drug in early-stage human testing, aligning with analysts’ predictions about which companies would be in the strongest position to launch an IPO.
Jack Bannister, a senior managing director at Leerink Partners, stated that the appetite to invest in the sector has not diminished. He, along with Perrone, noted that many other companies are quietly preparing for IPOs, such as by making confidential filings.
However, the perception of safety around experimental drugs has shifted. Bannister highlighted that having a drug in a Phase 3 trial is no longer considered as safe as it once was. This change in sentiment is reflected in several later-stage assets failing just months after their IPOs, despite having a deep pool of clinical data.
One notable example is Acelyrin. The California-based biotech encountered a significant obstacle in late-stage clinical testing of its anti-inflammatory drug izokibep in September, causing its share prices to plummet just four months after a successful IPO.
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