80% of U.S. stocks Biotech went public, and the Nasdaq fell by half. When will the bear market ease?

IPOs in the entire pharmaceutical and life science fields are going through an ice age, whether A-share Hong Kong stocks or US stocks

In the first three months of this year, A-shares seem to have a tendency to recover

There is only one Biotech listed on the Hong Kong stock market, Lepu Biotech, and two in the same period in 2021

There are no Biotechs listed in the US stock market this year.

However, it may be too early to say that the ice age is over

First, the number of pharmaceutical and life science companies that have attended meetings this year is not high

Second, the reserves of companies that have not attended the meeting are relatively insufficient

On the other hand, many investment institutions also suggested that biotech companies should be slow to go public

If there are still signs of a recovery in the A-share market, it is still a cold winter for US stock biotech companies, experiencing "probably the worst recession in 14 years".

Recently, BioPharma Dive, a well-known biotech media in the United States, analyzed the situation of start-up Biotech companies stagnating due to the sharp decline in the number of IPOs in the US stock market under the theme of "Music Stopped", revealing the opportunities in the bear market

01.

Not only has the number of Biotech IPOs plummeted, but the companies that have successfully gone public have generally performed poorly, with many of them plummeting in stock prices well below their IPO prices

In the previous year, the situation was completely different

While the new crown epidemic has disrupted everything, the value of biotechnology has been reassessed

Starting in 2020, Biotech's share price in the public market has soared

The excitement even attracted many investors who are not usually involved in the pharmaceutical industry.
In an interview with Biopharma Dive, Jerel Davis, managing director of California-based venture capital firm Versant Ventures, said with emotion, "Every IPO is creating value, and you have to participate in it.

.
"

The boom spawned hundreds of new biotechs and more fortunes
.
U.
S.
biotech IPOs in 2020 and 2021 set new records, with more startups going public and raising more money than ever before
.
According to data compiled by BioPharma Dive, there are 149 biotechs that have raised more than $50 million in IPOs in two years, up from 83 in the previous two years
.
Combined, the 149 biotechs raised nearly $30 billion, triple the amount in 2019 and 2018 combined
.

The shorter IPO path and the impressive return on investment from soaring market values ​​have attracted public investors while allowing more early-stage life science investors to raise fresh capital to start more companies
.
Otello Stampacchia, founder of life sciences investment firm Omega Funds, said many management teams have even stated that "we will go public within six months after completing this round of financing
.
" The Nasdaq Biomedical Index (XBI), which represents the performance of typical small and mid-cap biotech stocks in the U.
S.
stock market, finally hit an all-time high of $174.
74 on February 9, 2021
.

The global financial crisis of 2008 forced many venture capital firms to close or withdraw their investments in life sciences, but as more and more biotechs went public and performed well, an industry that had relied on advances in scientific research and cutting-edge pharmaceutical technology suddenly fell.
Become a new outlet, a risky bet
.

But with valuations ballooning, some industry experts are starting to get nervous
.

“Are we going a little too crazy here?” Todd Berry, head of life sciences at BDO, said in an interview in early 2021
.

Todd Foley, managing director of MPM Capital, said earlier-stage biotech listings at higher valuations had created a "disconnect" between their market capitalization and their actual value
.
Some biotechs with "cool" technologies and ideas that are far from clinical stage are valued at over $1 billion, and even far more than pharma companies with marketed products
.

Foley said it was more of a self-validating prophecy, "The stock price goes up after the IPO, the investors make money, so more people get involved in the IPO
.

A game of drumming and passing flowers will go on until "the music stops
.
"

In fact, the momentum that once propelled biotech to the top has begun to wane
.

02.
The bear market begins

In the second half of 2021, the speed and performance of US stock Biotech IPOs have declined sharply
.

As of the end of June, nearly 50 biotechs had raised at least $50 million in IPOs
.
That number dropped to 18 in the third quarter and 10 in the fourth
.
In June 2021, more than half of the Biotechs listed in 2021 have already fallen below the issue price
.
By December this increased to 80%, and by February 2022 the number is only slightly higher
.
This is a rare drop in recent years
.

Jefferies analyst Michael Yee said investors are "tired" from the game of scrambling to grab a lofty valuation
.
Many Biotech companies haven't even begun human trials of their drugs, and public investors who bought in after the IPO are holding shares at a price that doesn't quite match, with high valuations becoming unsustainable as the market softens
.

Clinical and regulatory setbacks, macroeconomic changes and an increasingly negative investment outlook have accelerated the market crash
.
Early 2022 saw the XBI index nearly halve from its 2021 high, wiping out years of gains
.

The entire biotech ecosystem has been hit
.
For example, Sana Biotechnology and Lyell Immunopharma, two Biotechs developing cell therapy, are also typical representatives of preclinical IPOs in the 2021 IPO wave
.

At the beginning of 2021, Sana Biotechnology broke through the fundraising target and raised more than 600 million US dollars, and the market value once rose to 6 billion US dollars after listing
.
Lyell Immunopharma is also growing rapidly
.
Raised nearly US$1 billion within three years of its establishment, and raised more than US$400 million in the IPO
.
However, the stock prices of the two companies have undergone violent shocks since their listing, and both have lost more than two-thirds of their market value
.

Momentum for biotech IPOs has turned from a tailwind to a trickle, as Biotech companies and investors assess the damage and adjust to what could be the worst recession in 14 years
.
Industry experts say that is likely to mean a decline in the average size and total number of IPOs in 2022 as well
.
While it's too early to tell, as of February 17, 2022, there were only six biotechs listed, compared to 20 last year
.

'For me it's no different from 2008,' said Michael Gilman, chief executive of Arrakis Therapeutics, a biopharmaceutical company.
"Only the strong or resilient will survive
.
"

03.
Opportunities in a bear market

The market pullback presents a tough choice for start-up Biotechs looking to hit the public markets
.

On the one hand, the company has adjusted its pipeline layout strategy and scale to cut costs, and on the other hand, it has adjusted its financing plan to adapt to the new environment
.

Biotechs preparing for an IPO will have to adjust their expectations, Versant's Davis said
.
Not only will it face more scrutiny on financing before the IPO, but it is also likely that there will not be as much value increase after the IPO as previously expected
.

Jordan Saxe, head of Nasdaq healthcare listings, said there were still more than 75 biotech companies waiting to go public as of February 2020
.
"We don't see a slowdown," Jordan Sax said
.

Even so, another question is what do investors think?

Perhaps it's time to rethink that we need great teams to develop great products for patients, not just take companies to the public market, said Stampacchia of Omega Funds, an investment firm specializing in secondary market transactions in life sciences
.

Todd Foley, managing director of MPM Capital, also predicted a more selective investor mentality, with overvalued valuations and fewer preclinical IPOs
.

Chris Garabedian, former CEO of Saepta Therapeutics and now founder of life science accelerator company Xontogeny, said this is an era tilted towards true life science investors
.
"The opportunity to invest in biotech companies that offer real value is still good, but it can be tougher for others that don't have substance," he said
.

Omega Funds founder Stampacchia is now reacting to any expected quick IPO listing of biotech companies by "laughing them out of the room"
.
Versant's Davis said that "the idea of ​​rushing to the public markets" with a quick funding round has changed
.
He said he would prefer to see differentiated science, rather than just some "adjustments
.
"

Jeffrey Finer, venture partner of Third Rock Ventures, a well-known investment institution behind Bluebird Bio, said that the entire field must be more cautious in the future
.

Bruce Booth, a partner at early-stage venture capital firm Atlas Venture, said the current public market environment is the toughest in years
.
He reminded start-up Biotech to "take a very long-term view
.
"

In fact, a shift in financing methods can be observed, and many Biotech companies and their venture capital investors are in no hurry to rush into a bear market
.
Unlike previous market downturns, many venture capital firms are flush with cash
.
Many early-stage life science investors, such as Arch Venture Partners, Versant, Flagship Pioneering, and Third Rock Ventures, have closed a slew of new funds over the past few years, giving them ample ammunition to back existing companies or start new ones
.

In January 2022, Third Rock led a $100 million Series A financing in Septerna Therapeutics, which focuses on the development of new small-molecule drugs.
For this, Third Rock Venture Partner and Septerna CEO Jeffrey Finer said that "we don't even need to pay attention to the public market right now
.
"

In addition to this, start-up Biotech may also be more willing to cooperate with large pharmaceutical companies earlier
.
While this partnership usually means staking part of the company's future, cash and proof of value can also earn young Biotech companies resources and time
.
Stampacchia, founder of Omega Funds, said big pharma has an appetite for similar collaborations, and like many Wall Street analysts have predicted, he expects a surge in future deals with Biotech
.

The most important thing for Biotechs that still have plans to go public is to "have to find a way to be patient," said Versant's Davis
.

Michael Gilman, chief executive of biopharmaceutical company Arrakis Therapeutics, said his company could wait
.
He said his company still has $200 million in cash in the bank ahead of a January 2022 research partnership with Amgen that will see a $75 million upfront payment
.
"When the market cycle comes back - and it eventually does - we'll be ready
," said Todd Foley, managing director at MPM Capital.
"Money is time in turn" when markets tighten
.

Part of this article was compiled from: https://