Initial public offerings in biotech have appeared to be on the upswing in the first two months of the year, with a handful of launches reaching over $100 million. The offerings brought back some excitement after a few tough years marked by the rising cost of capital due to higher interest rates, other macroeconomic headwinds, a sluggish investment environment and fewer IPOs than during the pandemic.
The strong start has been hailed as a possible rebound for the industry, but it’s not quite time to celebrate, according to David Crean, managing partner of M&A and strategic advisory firm Cardiff Advisory.
“It's a good start to the 2024 IPO class, but I think there needs to be a little bit more energy and momentum going into [the market],” Crean said. “It's not a switch you're going to just turn on.”
Instead of a flood of biotech IPOs in 2024, there may be a steady stream through 2025 as economic conditions improve and the market becomes more favorable. Looking at the performance of some of the companies that have launched in the first two months of the year is a good indicator of which biotech areas are now ripe for IPO success.
Top biotech IPO target areas
Companies that reaped millions in fundraising during the pandemic years when investors were “spending like drunken sailors” due to historically low interest rates, may be readying for an IPO in the near future, Crean said. The sector’s troubles, defined in part by rising layoffs last year, may be symptomatic of a spending hangover rather than an ongoing challenge for the entire sector.
And for those readying an IPO, the move may be to “survive to 2025,” according to Crean, who predicts more IPO announcements in the next 15 to 18 months. Interest rates could also fall in the coming months, which could rally the sector.
The fundamentals that make for a good IPO candidate in biotech are largely derisked companies with late-stage therapies, according to Crean, although early-stage companies will still sometimes go public.
“For very early stage companies that are looking to go public, it represents some challenges,” Crean said. “As a public market investor, they'll want to see high-quality clinical candidates from drug development companies being prioritized over the earlier states that exit the risks.”
Beyond those fundamentals, investors are eyeing specific areas within biotech, including oncology, autoimmune and cardio metabolic disease. And 2024 biotech IPOs in these areas have already seen success.
CG Oncology, the sector’s first IPO of 2024, initially raised a larger-than-expected sum of $380 million in its public offering and has since seen its stock rise further. The company, which is focused on developing therapeutics for patients with bladder cancer, launched its IPO at $19 per share and is currently trading around $35 per share as of market close March 12. The success of its launch and subsequent value growth makes the company one to watch, according to Crean, who pointed to the oncology focus and late-stage candidates as possible triggers for future IPOs.
Cardio metabolic disease and “anything to do with diabesity” — diabetes and obesity, said Crean — are other areas likely to see more IPOs. The success of Novo Nordisk’s Wegovy and Ozempic and Eli Lilly’s Mounjaro are indicators of investors’ appetite in the space.
Crean also clocked autoimmune as a top target, and pointed to Kyverna Therapeutics, which launched an IPO in February that raised $319 million. The developer of cell therapies for autoimmune diseases launched its IPO with shares priced $22 a piece and is now trading around $29 per share as of market close March 12.
Biotechs to watch
While 2024 started off with a bang, a surge of IPOs could still be coming this year and into 2025.
“I don't anticipate a broadening of the big IPO market until maybe the second half of this year,” Crean said.
Recent moves by high-profile investors, the timing of the latest funding round and the financial momentum in the industry’s subsectors are all key factors when predicting potential biotech IPO candidates. With these fundamentals in place, some biotechs may be ready to pounce on improving market conditions. Here are some of the biotechs to watch for a potential IPO and some that have already announced their intended offering, according to Crean.
Boundless Bio: Precision oncology startup Boundless Bio recently announced its planned IPO, and the company has a strong cap table of “significant investors” behind it, including Bayer, RA Capital, Vertex Ventures HC and more. The early-stage biotech’s pipeline is focused on ecDNA-driven cancers.
Alumis: Fresh off a series C funding round that brought in $259 million, Alumis is a clinical-stage biopharma company developing oral therapies for autoimmune diseases. The company plans to use the financing to initiate pivotal phase 3 clinical trials for its lead TYK2 candidate, ESK-001, which treats moderate to severe plaque psoriasis. The company has called its candidate “best in class,” and if approved, the drug would compete with Bristol Myers Squibb’s psoriasis pill Sotyktu, which scored an FDA nod in 2022. With recent funding, it’s unlikely Alumis will seek an IPO in 2024, but it could go public in 2025 or beyond, according to Crean.
Endeavor BioMedicines: With $163 million in funding already raised, California-based Endeavor Therapeutics’ pipeline includes two candidates for idiopathic pulmonary fibrosis. The company also penned a licensing agreement with Hummingbird Bioscience last year for exclusive rights to HMBD-501, a next-generation HER3-targeted ADC. With the company’s last fundraising round in 2022, it could be looking to raise capital through an IPO next.
Autobahn Therapeutics: San Diego-based Autobahn Therapeutics develops regenerative medicines aimed at CNS disorders. Its early-stage pipeline includes small molecule therapies for both rare and prevalent CNS disorders, while its lead molecule, a CNS-directed thyroid hormone receptor beta (TRβ) agonist, is initially targeting major depressive disorder. Autobahn has raised nearly $109 million and counts Biogen, Pfizer Ventures and BMS among its major investors.
