Positive momentum for newly listed biotech companies
After years of hibernation, biotech IPOs gained fresh momentum in 2024. But how has the market welcomed the newly listed companies, and what does this reveal about the current interest in the sector? BioStock has taken a closer look.
Entering the stock market is often crucial for capital-hungry biotech companies to finance their long-term development projects. However, the IPO market has been relatively quiet since the record year of 2021, when over 100 biotech companies listed their shares worldwide.
The uncertain market climate has been challenging to navigate, causing many companies to pull the handbrake in anticipation of better times. However, as the macroeconomic situation has begun to brighten, the trend is starting to reverse, with companies again looking at the stock market as an alternative for raising capital. This trend break indicates a newfound interest from investors.
Weak start in the US
The year began with a wave of newly listed biotech companies. Not surprisingly, the US was at the forefront, with companies such as Alto Neuroscience, Fractyl Health, and Kyverna Therapeutics leading the way. However, the market’s reception has been lacklustre, with several stocks trading down by over 80 per cent. But there are glimmers of light. One example is CG Oncology, whose shares have risen by over 90 per cent since listing at the end of January.
The IPO comeback is closely linked to developments in the fixed-income market. In early 2024, there were solid hopes for upcoming interest rate cuts, making investing in long-term, high-risk companies more attractive – where biotech is a classic example. However, the rate cuts came later than expected. There was a new lull after the initial IPO wave as the market awaited more precise signals from the Fed.
The Nordic countries followed suit
In the meantime, two listings were carried out here at home in the Nordic region, of which Cinclus Pharma has received the most attention. The company raised money to prepare a phase III study with Linaprazan Glurate. Like many American colleagues, the company had a rough start, with its shares dropping almost 40 per cent since market entry.
The stock market entry was also a rocky road for Lund-based NanoEcho. Along the way, the company was forced to lower the IPO price from SEK 0.40 per share to SEK 0.16, signaling investors continued cautious attitude towards the sector. However, since entering Nasdaq First North Growth Market, the share has had a strong development and is so far up over 40 per cent.
Interest rate cut raises spirits
In September, the Fed finally announced the long-awaited interest rate cut, which—at least initially—seems to have lifted the mood in the sector. First and foremost, IPOs have woken up from their slumber. No less than 8 biotech companies made their entrance during September and October and raised a total of just over USD 1.5 billion. This means that this year’s total amount already exceeds the totals for both 2022 and 2023.
In addition, the newcomers in this second wave have gotten a far friendlier reception from stock market participants than those listed earlier this year. Out of the 8 cases, only one sits in negative territory at the time of writing. Upstream Bio has performed best. The company is developing verekitug, a monoclonal antibody for treating inflammatory diseases. The shares were listed on Nasdaq on October 10 and have since risen by over 40 per cent.
We have also seen stable gains of over 20 per cent in names such as BioAge Labs and MBX Biosciences, both of which work in metabolic diseases, as well as Zenas BioPharma and Bicara Therapeutics, which work in autoimmune diseases and cancer, respectively.
Turnaround underway?
It is still too early to tell whether this is the beginning of a more lasting trend. Analysts point out that interest rates will take several months to impact the market fully. Moreover, the biotech sector will depend highly on incoming data and subsequent maneuvers from the Fed.
However, the fact that we are seeing a healthier IPO market is an important signal for the entire industry.
– The public markets have deeper pockets and provide access to cheaper capital than the private ones. Since more companies can access that capital, there will be more investment in biotech, Tim Opler, Managing Director at the investment bank Stifel tells Labiotech.
Ultimately, the biotech sector pushes for better treatments and more cures for disease-affected patients. A noble assignment that benefits from an improved IPO market.