Recent developments in the life sciences & bio technology sectors – US capital markets
Cameron Cooley, one of our Audit Seniors, is currently completing an international secondment in the United States of America for CBIZ MHM, a fellow Kreston firm. During his secondment Cameron will be providing a ‘West Coast perspective’ on business and sector issues. Keep reading to learn the recent developments in the life sciences and bio technology sectors – US capital markets.
industries have significantly outperformed the market for nearly four years running. Venture capital investment has been consistently high throughout this period leading to post GFC (global financial crisis) record peaks of 50 and 81 biopharmaceutical IPOs (initial public offerings) in US capital markets in 2013 and 2014 respectively, raising $13.1 billion in total (Bloomberg data).
The outlook in the third quarter of 2015 seemed as though 2015 would be able to break these records as a year dominated by pre-revenue IPOs. These include the offering of NantKwest, Inc. (Nasdaq: NK), the cancer immunotherapy company based in San Diego, California, which raised over $200mil in their initial offering with an initial market cap of $2.6 billion. This was reported to be the largest initial market cap of a pre-revenue company in history (audited by CBIZ MHM, Inc. – a fellow Kreston International member in the USA).
In late September 2015, a number of comments raised temperatures in the media crucible; not least Hilary Clinton’s comments on “price gouging”. Following Turing Pharmaceuticals Inc. increasing the price of their drug to treat an infection suffered by AIDS and cancer patients from $13.50 a pill to $750 Clinton called for policy changes to make prescription drugs more affordable to Americans. This drew increased scrutiny and unwanted attention to the industry, compounded by the dissatisfaction of the US public who already suffer comparably high drug prices: The International Federations of Health Plans (IFHP) previously reported Americans pay between two and eight times more for therapeutics compared to many European countries. Further to this, there were media reports of the industry bubble coming to an end and investors listened.
These factors, amongst others, caused a reduction in investment availability in the fourth quarter of 2015, resulting in significantly fewer offerings taking place than predicted at the beginning of the year. The investment banks and advisors of many companies looking to go public or make subsequent offerings in final quarter of 2015 have been advised to delay until the New Year.
Indicators suggest that the first quarter of 2016 should see many of these delayed offerings come to fruition. Based on the data from companies with less successful offerings in the closing months of 2015, it would appear that investors are being more selective in their investments, favouring product lines with a proven track record after recognising the inherent risks and volatilities associated with these industries. Once again the life science and biotech industries are expected to be interesting ones to watch out for in 2016.