Report sees strong year ahead for life sciences IPOs despite headwinds

The report, by law firm WSGR, noted an almost twofold increase in life sciences IPOs – especially biotech – and a greater number priced at $250 million or more.

Initial public offerings in the life sciences industry vastly outnumbered those in the technology industry last year, in addition to being larger in number and value than the year before, a report found. But while 2019 could be another big year for the sector, there are also potential headwinds.

The report, by Palo Alto, California-based law firm Wilson Sonsini Goodrich & Rosati, found that 64 life sciences companies priced IPOs in 2018, a nearly twofold increase over 2017. While only one 2017 IPO was valued at $200 million or more, six were in 2018, while three exceeded $250 million. Last year saw the largest ever biotech IPO, when Moderna raised more than $600 million, though its stock fell significantly not long after hitting the market.

Further, according to the WSGR 2018 and Life Sciences IPO Report, biotechnology IPOs made up the lion’s shares of offerings in life sciences, with 38 of the 64 coming from that sector, compared with a respective 15 and 11 from pharmaceutical and device companies. The 29 technology companies in the report included a wide range of software and hardware firms, but were not necessarily connected to healthcare.

However, the report indicated mixed sentiments on the outlook for 2019. In particular, the ongoing government shutdown and market volatility at the tail end of 2018 prompted some companies to delay deals, it noted. However, WSGR expects activity in capital markets this to year to be similar to last year, and companies with high valuations – particularly in tech – indicate IPOs could be strong in 2019.

Due to the shutdown, now the longest in the country’s history, the Securities and Exchange Commission is unable to approve IPOs. The Wall Street Journal reported Monday that two biotechnology companies, Gossamer Bio and TCR2 Therapeutics, were employing a workaround to begin trading without SEC approval. In a move that is allowed by the SEC – and touted as an option for companies amid the shutdown – but apparently not by the Nasdaq also fraught with legal risks, the companies would change the language in their IPO filings to make their offerings effective automatically after 20 days.

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