What do the following biotech stocks have in common – Anthera (NASDAQ:ANTH), Ironwood (NASDAQ: IRWD), Aveo (NASDAQ:AVEO), NeoVacs (EPA:ALNEV) and Nupathe (NASDAQ:PATH)? They are all biotech companies that achieved fundings through IPOs in 2010. And ALL are underwater compared to the listing price (and below or flat compared to the NASDAQ index over the same respective periods):
- Anthera listed in March, down over 50% (NASDAQ flat)
- Ironwood listed in February, down 18% (NASDAQ up 2%)
- Aveo listed in March, down 5% (NASDAQ also down 5%)
- Neovacs listed in April, down 30% (NASDAQ down 10%)
- Nupathe listed in August, down 18% (NASDAQ down 2%)
The companies are all loss making with largely mid-late stage clinical development pipelines (Aveo’s is the earliest pipeline with a lead product in phase I for cancer). Also interesting to note is that the two companies which did the best (least worst!), Aveo and Ironwood, despite being loss making both also made revenues in the millions contributing to operations. (Nupathe is also down the same as Ironwood, but has only been listed since August so has fallen much more steeply).
In the meantime, a couple more companies are also planning fundings through IPOs soon – PacBio and Zogenix. PacBio is developing a new DNA sequencing technology and Zogenix is a drug delivery company with its first product already on the market. Both companies already have sales and are (on the surface at least) lower risk plays than pure-play new therapeutics.
It will be interesting to see how they fare in the coming market – will they take haircuts (as the others have had to); will the market perceive them as lower risk and recognise the revenues they already have; will the IPO window continue to creep open or will we be hit by the oft mentioned “double-dip recession” – which will snap back any appetite for risk based investments. Who knows? But what we do know is if you are planning a biotech funding through an IPO, revenues count.
And of course, this all impacts investment through the private sector from venture capital and big pharma investors to partnering. VCs are looking for nearer term bets with lower risk, ever mindful of having to support existing portfolio companies. And big pharma, with looming patent expiries and cash, are currently seen as the buyer of choice while other sources of capital are less available.
Feel the breeze – a breath of fresh air…or a cold chill?
This post is by Raman Minhas. He is CEO of ATPBio, a consultancy supporting biotech funding through VC, big pharma investors and partnering.