Fundamentally driven

Biotech winners, losers in 1Q18

Continued struggles by the mega-cap bellwethers and the resurgence of volatility in global equity markets were the major themes of 1Q18, whipsawing biotech stocks throughout the quarter but leaving index values little changed on the whole.

Deeper inspection revealed a sectorwide dispersion in market prices, however, with fundamental drivers of value ultimately determining the quarter’s biggest winners and losers.

Despite the volatility, the first quarter proved to be another strong one for fundraising.

Sixteen biotechs raised $1.2 billion via IPOs worldwide, more than doubling the $564.6 million raised by 15 biotechs in 1Q17.

In fact, 1Q18 was the most robust first quarter for new issues since 1Q15 saw 23 IPOs that raised $1.9 billion.

NASDAQ IPOs by elite biotechs are expected to remain strong, with syndicates comprised of deep-pocketed VCs and crossover investors doing most of the heavy lifting in financing the deals.

The proposed new biotech chapter by Hong Kong Exchanges and Clearing Ltd. (HKEX) is likely to see its first bolus of activity in 2Q18 as well.

A number of biotechs with operations in or exposure to the Asia Pacific region are rumored to be eyeing a listing once the exchange implements the new chapter, which is expected by the end of April.

The follow-on market was likewise exceptionally strong in the first quarter, with 82 financings raising $9.4 billion. Since BioCentury began tracking financings in 1994, only 1Q15 proved to be a busier start to a year, when 95 follow-ons secured $11.4 billion.

Winners and losers

Across all market cap tiers, biotech stocks gained a median of just 2% during 1Q18, although this translated into $20.8 billion in total value creation.

Large caps valued over $10 billion did little to help, declining a median of 5% and erasing $18.4 billion in market cap during

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