Handful of biotechs expected to IPO this fall, but many are stuck in ‘holding pattern’ until 2024

A pair of late-stage biotechs submitted IPO plans last week as industry insiders gear up for what could be a handful of post-Labor Day public debut pitches.

To repeat: That’s a handful of IPOs, not an overflowing basket of filings like the days of 2021 that saw at least 100 biotech IPOs. But any sign of biotechs lining up to ring the trading floor bell could give hope to their privately-held fellows. If members of the fall class and the late July cohort are successful in their first few months of trading, then more startups may have the confidence to pursue public markets next year.

Sheila Gujrathi

“The good news is that it’s continuing to stay active with hopefully some acceleration, but definitely the floodgates haven’t opened yet,” said Sheila Gujrathi, board member of multiple biotech startups, including ADARx, which revealed a $200 million Series C earlier this month.

After a brutally quiet first half, the number of biotech IPOs began to inch up this summer. Most experts have pointed to Labor Day as the true start to this year’s biotech IPO window, though companies are still grappling with shifting investor appetites, cruelly high interest rates and declining valuations.

“The opportunity cost of a dollar for any buyer in biotech right now is really high because the palette of options, the menu of options, is wide, diverse and relatively cheap,” said Zavain Dar, co-founder of VC firm Dimension.

Insiders say they expect between five and 10 companies to hit the market between Labor Day and Thanksgiving, echoing what Jordan Saxe, Nasdaq’s head of healthcare listings, told Endpoints News last month.

‘Slow and steady’

Last week’s IPO pitches, from brain diseases drugmaker Neumora and radiopharma startup RayzeBio, are both viewed as relatively less risky bets because they have assets in, or about to enter, Phase III trials.

“I wouldn’t be surprised if people have pumped the brakes just to see how the post-Labor Day market plays out and how Rayze and Neumora trade,” said Ray Camahort, partner at Novo Ventures.

Earlier this summer, he thought there was a “light at the end of the tunnel.” But with the closely-watched $XBI biotech index down about 10% in the past three to four weeks and the Fed’s interest rate mantra appearing to be “higher and longer,” that’s put more pressure on higher-risk markets like biotech.

Zavain Dar

“It’s a little bit of a graveyard,” Dar said. “Unless you have a GLP-1 agonist, I think it’s tough to unnerve the IPO market right now.”

A bigger cohort of IPO-seekers is anticipated to jump in line after the annual JP Morgan healthcare confab in January, and industry insiders say they’re hearing that 20 or so private biotechs are gearing up for potential listings in the first half of 2024. Those companies will likely want to go public well before the US presidential election and any potential distractions or headwinds that could happen during that period, per a banker.

Beth Seidenberg, founding managing director of Westlake Village BioPartners, said that queue could include some of her firm’s portfolio companies. Westlake backed two startups that went public this year — Acelyrin and Sagimet Biosciences. Both had clinical-stage assets and near-term data readouts, the type of profile that investors demand these days. It’s in stark contrast to the preclinical IPO wave of 2021.

Beth Seidenberg

“Biotech companies get rewarded based on products, not just a platform,” Seidenberg said. “And investors have woken up to that after all of the tremendous losses for a lot of companies that were preclinical platforms, big ideas, no product in sight. Those have not done well.”

About 80% of the biotech IPOs over the past 18 months have been clinical-stage companies, said Athena Countouriotis, CEO of Avenzo Therapeutics, which is attempting to follow a similar playbook as Acelyrin by licensing clinical and preclinical assets.

She expects the first licensing deal to come this fall, with a Series B crossover round to follow and then an IPO next year. Countouriotis, who previously led Turning Point Therapeutics, said she already has a ticker picked out for Avenzo: AVZO, which is shorthand for her children’s names. It’ll have to IPO by the end of next August if it wants to keep the ticker under Nasdaq rules, she said.

Countouriotis hopes to repeat the strong IPO she did at Turning Point in 2019. “My son gives me a really bad time because he’s a vegetarian now, but in that year, there were only two IPOs that beat Turning Point — Beyond Meat and Karuna [Therapeutics]” in terms of performance, Countouriotis said. Bristol Myers Squibb ended up acquiring the oncology drugmaker last year for a total consideration of $4.1 billion.

Get in line 

The upcoming batch of listings is expected to fit a more tried-and-true profile than the preclinical-heavy crop of IPOs in the pandemic. Many of those companies had little data to show in their first few earnings calls and relatively weak stock performances to date.

In the coming weeks, industry watchers will likely direct their eyes toward other biotechs that have raised recent crossover rounds or announced large financings from well-known names.

That includes Phase III bladder cancer startup CG Oncology; ophthalmology-focused Lenz Therapeutics; sleep apnea biotech Apnimed, which considered an IPO last year; and oncology drug developer Boundless Bio.

Also of interest are those that bagged big Series C and D rounds in 2022 — Mathai Mammen-led FogPharma, GSK-allied LifeMine Therapeutics and quickly-growing manufacturer Resilience — likely banking on the hope that 2023 would’ve started off on a brighter note.

But that doesn’t preclude startups with big bets on genetic medicines and newer technologies, like Metagenomi.

Ray Camahort

“We’re very excited about that company,” said Camahort, whose firm Novo co-led Metagenomi’s Series B extension last year. The startup has “the profile of an earlier-stage company but with a very differentiated and exciting platform — I think Metagenomi fits that bill.”

Biotechs delving into hot disease areas could also squeeze onto the Nasdaq. Take Carmot Therapeutics and Rapport Therapeutics as examples of well-financed private companies operating in two spaces generating plenty of headlines: cardio-metabolic diseases and neuroscience.

Dar and Seidenberg both said great companies can go public regardless of the market conditions, but for most private biotechs, there’s not that level of luxury.

Multiple companies are “waiting in the holding pattern,” according to Gujrathi, and some are running dual-track processes exploring whether to sell to Big Pharma or go with an IPO, per an investment banker.

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