SOURCE: Burrill & Company

Burrill & Company

June 04, 2013 08:45 ET

Life Sciences IPOs Have Biggest Month in 13 Years, Burrill & Company Says

Eight Companies Debut in May as Queue Grows to 17

SAN FRANCISCO, CA--(Marketwired - Jun 4, 2013) - A total of eight life sciences companies went public on U.S. exchanges in May, the busiest month for initial public offerings in the sector since August 2000 when 16 issues debuted, Burrill & Company reported.

The eight life sciences IPOs in May equaled all the number of IPOs completed during the preceding four months of 2013. At the same time, the queue of life sciences companies filing to go public continues to grow, with seven additional life sciences companies publicly filing registration statements with the U.S. Securities and Exchange Commission during the month, bringing the total number of companies in registration to 18.

The activity reflects an effort by companies to capitalize on the increasingly receptive public market for biotech new issues. It suggests that eased regulatory requirements, the ability to file confidentially, and the ability to test the waters with investors through provisions of the JOBS Act, are making going public more attractive to emerging growth life sciences companies.

"This is the best environment we've seen for biotech IPOs in a long time, but it remains a demanding market for companies seeking access to the public markets," says G. Steven Burrill, CEO of Burrill & Company. "We are still in an environment where companies often need to price deals below their target to get them done and where venture investors are committing to purchasing stock in the IPO."

The clinical-stage personalized cancer therapies company Epizyme, the last of the May IPOs, provided a strong finish to the month. It went out at the top of its range, raising a total of $77 million dollars, and closed the month up more than 53 percent.

Overall, life sciences IPOs in 2013 are up an average of 20.9 percent. Of the 17 issues, nine priced below their target range and seven priced within their target range. Zoetis, the animal health spin-out from Pfizer, was the only issue to price above its range. Overall, companies on average priced 17 percent below their targets and sold 35.4 percent more shares than they had planned.

Performance of 2013 US IPOs
 
Company Ticker   Category   IPO Date   Target Price Range
(USD M)
  Target No. of Shares (M) Capital Raised (USD M)   Actual No. of Shares   Offering Price (USD)   Price 5/30/13 (USD)   Return from IPO
                                     
LipoScience LPDX   Diagnostics   1/25/2013   13-15   5 51.8   5.75   9   6.75   -25.0%
Stemline Therapeutics STML   Therapeutics   1/29/2013   11-13   3.5 38.2   4.8   10   17.00   70.0%
Kalobios KBIO   Therapeutics   1/31/2013   12-14   3.9 70.0   8.8   8   5.62   -29.8%
Zoetis ZTS   Therapeutics   1/31/2013   22-25   86.1 2,564.0   99   26   32.00   23.1%
Tetraphase Pharmaceuticals TTPH   Therapeutics   3/20/2013   10-12   6.8 80.6   11.5   7   8.00   14.3%
Enanta Pharmaceuticals ENTA   Therapeutics   3/20/2013   14-16   4 64.4   4.6   14   19.48   39.1%
Cancer Genetics CGIX   Diagnostics   4/5/2013   11-13   4 6.9   0.69   10   11.75   17.5%
Omthera Pharmaceuticals OMTH   Therapeutics   4/11/2013   12-14   5.8 64.0   8   8   13.13   64.1%
Chimerix CMRX   Therapeutics   4/11/2013   13-15   6.1 117.9   8.4   14   21.50   53.6%
Insys Therapeutics INSY   Therapeutics   5/2/2013   16-18   4 36.8   4.6   8   11.04   38.0%
Receptos RCPT   Therapeutics   5/8/2013   14-16   4.7 72.8   5.2   14   15.87   13.4%
Quintiles Transnational Q   Tools/Tech   5/9/2013   36-40   13.7 525.0   13.1   40   44.17   10.4%
BioAmber BIOAU   Industrial/Ag   5/10/2013   15-17   8 80.0   8   8   9.00   12.5%
Ambit Biosciences AMBI   Therapeutics   5/15/2013   13-15   4.6 65.0   8.1   8   6.84   -14.5%
Alcobra (Israel) ADHD   Therapeutics   5/21/2013   10-12   2.3 25.0   3.1   8   7.20   -10.0%
Portola Pharmaceuticals PTLA   Therapeutics   5/22/2013   13-16   6.9 140.5   9.7   14.5   18.20   25.5%
Epizyme EPZM   Therapeutics   5/30/2013   13-15   4.3 88.7   5.9   15   22.99   53.3%
                                     
                                     
Average return from group   20.9%
     
     
Note: Target range and number of shares is original proposal, which changed if the company failed to price in that range
 
Note: Includes overallotments
 

May not only proved to be a big month for IPOs, but for M&A activity too. Valeant Pharmaceuticals' $8.7 billion acquisition of Bausch + Lomb and Actavis' $8.5 billion deal for Warner Chilcott pushed global M&A deals to $22.4 billion in the month, a 164 percent increase over the same month last year. Global M&A deals year-to-date have topped 56 billion and are 3.6 percent above the same period in 2012.

After being rejected as a suitor by collaborator and sometime rival Actavis, Valeant announced it would buy the global eye health company Bausch + Lomb, adding eye drugs, vision care products including contact lenses, and surgical equipment to its portfolio. The deal's $8.7 billion total includes $4.5 billion for Warburg Pincus, a private equity investor that took Bausch + Lomb private in 2007 and $4.2 billion to pay back Bausch + Lomb's outstanding debt. The deal provides Valeant with a global brand and low reimbursement risk as most of Bausch + Lomb's products are paid for out-of-pocket.

Actavis, the world's third-largest generic pharmaceutical company, is acquiring specialty pharmaceutical Warner Chilcott for about $5 billion in Actavis stock and the assumption about $3.5 billion in long-term debt. The deal will give Actavis new women's health and urology products, as well as gastroenterology and dermatology franchises. One of the benefits of the deal is the lowering of Actavis' tax rate to 17 percent from about 37 percent after the companies combine as a new corporate entity in Ireland, where Warner Chilcott is currently incorporated.

Elan continued to fend off Royalty Pharma's hostile takeover attempt by spending $1 billion for a 21 percent stake in Theravance's royalty stream from four respiratory programs. It also acquired the Austrian orphan drug company AOP Orphan Pharmaceuticals for $339 million in cash and stock upfront and up to an additional $350 million tied to the advancement of certain late-stage clinical programs.

Big Pharma was also in a buying mood, with Novo snatching up Norway-based anti-invectives maker Xellia Pharmaceuticals for $700 million; AstraZeneca paying $323 million upfront for newly public Omthera Pharmaceuticals for its late-stage omega-3 lipid lowering therapy, with another $120 million in CVRs; and GlaxoSmithKline spending $325 to acquire the Swiss biotech Okairos and its vaccine platform technologies.

Although global partnering activity in May was more than 300 percent above activity in May 2012, it continues to lag last year's activity year-to-date, ending the month down 5.6 percent. U.S. licensers and collaborators, however, have seen an increase in deals, which are up 26.3 percent year-to-date compared to the same period in 2012. It's difficult to gauge real deal values, however, as many deals are announced without disclosed financial terms and Big Pharma continues to focus primarily on research and discovery collaborations with licensing options.

Privately-held life sciences companies raised $1.1 billion globally in new capital, a 10 percent increase over May 2012, and up 2 percent year-to-date compared to last year. Capital raised by U.S. companies was up almost 18 percent in the month with most of the top financings in later-stage rounds. The top financing was completed by Ophthotech, which raised $50 million in a series C round plus an additional $125 million in a royalty stream financing from Novo. The money will be used to fund a late-stage trial of Ophthotech's lead compound Fovista in combination with anti-VEGF therapy to treat neovascular age-related macular degeneration, or wet AMD. In two mid-stage studies, the combination therapy has been shown to provide better results than the current standard-of-care, which is the use of the anti-VEGF Lucentis, made by Roche, as a monotherapy.

Globally public companies raised $11.8 billion in new capital in May, up 110 percent from May 2012. Most of the increase was driven by debt offerings, which are up 139 percent globally year-to-date compared to 2012 as companies take advantage of low interest rates to raise new capital for acquisitions and share buybacks. Global public company financings are up 45 percent since the beginning of 2013, compared to the same period last year as companies take advantage of growing public investor enthusiasm for biotech.

Scorecard YTD-May 2013              
    YTD May13   YTD May12   Change  
Global Venture Capital   5,180   5,077   2.0 %
U.S. VC   3,918   3,673   6.7 %
               
IPOs (19 in 2013 vs 17 in 2012)   4,125   1,151   258.4 %
U.S. IPOs (17 in 2013 vs 8 in 2012)   4,080   549   643.2 %
               
Global PIPEs   1,452   3,175   -54.3 %
U.S. PIPEs   549   664   -17.3 %
               
Global Follow-ons   4,682   3,206   46.0 %
U.S. Follow-ons   3,777   3,025   24.9 %
               
Global Other Equity   559   752   -25.7 %
U.S. Other Equity   476   669   -28.8 %
               
Global Debt Offerings   18,928   7,924   138.9 %
U.S. Debt   14,281   5,007   185.2 %
               
Global Other Debt   4,254   7,208   -41.0 %
U.S. Other Debt   1,561   5,794   -73.1 %
               
Total Global Public Financings   34,000   23,416   45.2 %
Total U.S. Public Financings   24,724   15,708   57.4 %
               
Global Partnering   11,788   12,493   -5.6 %
U.S. Partner/Licenser   8,763   6,936   26.3 %
               
Global M&A   56,144   54,218   3.6 %
M&A, U.S. Target   34,116   38,949   -12.4 %
               

The U.S. Food and Drug Administration's Center for Drug Evaluation and Research approved three new cancer therapies in May and one drug for chronic obstructive pulmonary disease. GlaxoSmithKline secured three of the month's four approvals, getting a green light to market the late-stage melanoma therapies Tafinlar and Mekinist on May 29. Both drugs target cancers with gene mutations detected by a companion diagnostic developed by BioMerieux. GSK also won approval with Theravance to market the COPD drug Breo Ellipta. Bayer Pharmaceuticals gained approval for Xofigo, a therapy for men with late-stage castration-resistant prostate cancer. Under the FDA's priority review program, Xofigo was approved more than three months ahead of its August 14 PDUFA date.

Finally, in a closely watched case, the U.S. Supreme Court decided unanimously that Indiana farmer Vernon Bowman infringed on Monsanto's patent for "Roundup Ready" soybean seeds when he bought second generation patented soybean seeds and planted and harvested them without Monsanto's permission. The ruling, which concurred with lower court decisions, could have had broad ramifications not just for the agricultural biotech industry, but also for diagnostics, therapeutics, and other sectors that make use of stem cells, vaccines, transgenic bacteria, and other patented self-replicating organisms.

"The decision is an important one for the industry," says Burrill. "It was a narrow ruling, but given what was at stake, it could have done great harm."

BURRILL INDICES  
Index 12/31/2012   5/24/2013   5/31/2013   Week Change     Year Change  
Burrill Select 607.66   817.40   819.80   0.3 %   34.9 %
Burrill Large Cap 736.90   998.89   1010.91   1.2 %   37.2 %
Burrill Mid-Cap 309.52   392.72   402.22   2.4 %   29.9 %
Burrill Small Cap 105.48   122.13   127.05   4.0 %   20.4 %
Burrill Diagnostics 191.32   211.30   211.26   0.0 %   10.4 %
Burrill Personalized Medicine 119.22   151.30   149.91   -0.9 %   25.7 %
Burrill Biogreentech 162.27   183.60   183.67   0.0 %   13.2 %
NASDAQ 3019.51   3459.14   3455.91   -0.1 %   14.5 %
DJIA 13104.14   15303.1   15115.57   -1.2 %   15.3 %
S&P 500 1426.188   1649.6   1630.74   -1.1 %   14.3 %
Amex Biotech 1547.03   1982.632   1983.77   0.1 %   28.2 %
Amex Pharmaceutical 369.57   434.041   421.25   -2.9 %   14.0 %
                       

About Burrill & Company
Founded in 1994, Burrill & Company is a diversified global financial services firm focused on the life sciences industry. With $1.5 billion in assets under management, the firm's businesses include venture capital/private equity, merchant banking, and media. By leveraging the scientific and business networks of its team, Burrill & Company has established unrivaled access and visibility in the life sciences industry. This unique combination of resources and capabilities enables the company to provide life sciences companies with capital, transactional support, management expertise, insight, market intelligence, and analysis through its investments, conferences, and publications. Headquartered in San Francisco, the company oversees a global network of offices throughout the United States, Latin America, Europe, and Asia. For more information visit: www.burrillandco.com.

Contact Information

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    Daniel Levine
    Managing Director
    Burrill & Company
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    415-591-5449