How crossover, insider support and big money correlated with performance across 1H19 IPOs

Big money and crossover support continue to drive IPO performance in 1H19

The performance of 1H19 IPOs point toward a continuation of a dual-class system where biotechs backed by deep-pocketed VCs and crossover investors can tap the public market at will and generate stronger after-market performance than companies lacking these ingredients.

In the first six months of 2019, 47 IPOs raised nearly $6.3 billion -- the largest aggregate amount in the first half of any year since BioCentury began tracking financings in 1993.

Investors showed little discrimination regarding stage of development or therapeutic area, with a wide variety of biotechs coming to market despite heavy volatility that saw the sector roar upwards in the first quarter only to plunge in the second.

One clear observation from the deals is that companies with the best after-market performance in 1H19 were those backed by top-tier VCs and crossover investors that provided insider support -- a continuation of a trend that began in 2016 (see “Elites Always Welcome”).

While the situation isn’t black and white, with several exceptions falling on each side of the performance equation, it does offer a warning that if market volatility remains, crossover investors and top-tier inside support may be the best bet to prepare for an IPO.

More money = better performance

The IPO window this year has been open for biotechs across virtually all stages of development and therapeutic areas, but the deals have not been backed by the type of large-scale investor push that lifts all boats.

Of the 47 deals completed, after-market performance was evenly spread: 18 (38%) deals finished 1H19 up 10% or more from their initial price, while 15 (32%) deals were off 10% or more from their IPO; 14 (30%) companies were largely unchanged at June 30 (see Figure: “IPO performance”).

BioCentury found no correlation between phase of development or therapeutic area and post-market performance.

In both the gainer and decliner cohorts of IPOs, the companies’ lead products spanned the spectrum from preclinical, early-stage clinical, late-stage and marketed.

Cancer and neurology were the most common therapeutic areas in both groups, in line with broader investment themes, with 10 other therapeutic areas

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