US biotech IPO market yet to see previous high levels due to challenging market conditions

New Delhi: The US biotech initial public offerings (IPOs) experienced a 79% decrease in the number of completed offerings from 2021 to 2022. This dip followed the IPO boom in 2020 and 2021, which saw an influx of early-stage biotech companies that completed IPOs and went public with high company valuations that have since declined.

Against this backdrop, the biotech IPO market is yet to reach the highs seen previously due to challenging market conditions, according to the Pharma Intelligence Center Deals database of GlobalData, a leading data and analytics company.

Ophelia Chan, MSc, Business Fundamentals Analyst at GlobalData, comments: “The announcement by the US Federal Reserve to further raise interest rates to curb inflation, coupled with other factors impacted the market instability, and subsequently investors became increasingly cautious going into 2022. These circumstances have created a challenging environment for startups seeking to go public.”

Note: Includes all completed deals from 2018 to 2022 as a % growth from the baseline year 2017. Includes IPO deals for target companies located in the US.

According to GlobalData’s Pharma Intelligence Center Deals database, there were over 300 completed IPOs from 2018 to 2022 in the US. In 2021, 46% of the completed IPOs were in discovery, preclinical and phase I stages of development, highlighting a large proportion of companies going public in early-stage development.

Chan adds: “Last year, the biotech IPO market experienced a decline in the number of IPOs and companies that did go public saw a downturn in stock price. This made investors increasingly cautious, particularly with early-stage companies, favoring those that already have drug candidates in clinical trials.”

However, US-headquartered companies such as Amylyx and Prime Medicine have been successful in going public with both late and early-stage drugs.

Chan concludes: “The current economic climate poses challenges for private biotechs seeking to go public, particularly with the recent increase of interest rates in the US to nearly 5%. It is yet to be determined when interest rates will ease and markets stabilize to improve investor confidence, leading to more early-stage biotech companies going public. This could drive innovative drug development and create opportunities for collaboration within the industry.”