Source: Burrill Media LLC
SAN FRANCISCO, CALIF., July 2, 2014 (GLOBE NEWSWIRE) -- Life sciences companies raised $4.7 billion globally in 68 initial public offerings during the first half 2014, exceeding the 66 life sciences IPOs completed in all of 2013. While initial public offerings on U.S. exchanges accounted for 55 of those deals and $3.9 billion of the total capital raised, IPO activity in Europe increased with the $333.5 million raised by U.K. biotech Circassia on the London exchange, the biggest deal of the year.
Biotech companies developing innovative therapies accounted for 51 of the completed offerings globally and 42 of the offerings completed on U.S. exchanges. As a group, they not only outperformed the general market, but also the other life sciences sectors, such as diagnostics, tools, medical devices, and digital health. While the 55 companies in the 2014 IPO class ended the first half of the year up an average of 19 percent(32 up and 23 down) the 42 therapeutics companies finished the first half of the year up and average of 27 percent (28 up and 14 down).
"Investors' appetite for biotech IPOs has never been stronger," says G. Steven Burrill, CEO of Burrill Media, which produces publications and events focused on the global life sciences industry. "The sector is benefiting from encouraging clinical results and the approval of new drugs that are making meaningful contributions to improving health outcomes. The first half of 2014 saw the most life sciences offerings completed in any six month period ever."
Although investors' appetite for life sciences IPOs slowed in the second quarter of 2014, there was still plenty of interest in biotech IPOs. Globally, nine companies completed offerings in June, raising a total of $641 million in capital. Three drug developers priced upsized offerings above their target range: cancer immunotherapy developer Kite Pharma raised $128 million pricing 30.8 percent (above the midpoint of its target range); hyperkalemia drug developer ZS Pharma raised $108 million (pricing 12.5 percent above the midpoint of its target range); and obesity drug developer Zafgen raised $96 million (pricing 6.7 percent above the midpoint of its target range).
"While no one expects to see as many companies go public during the second half of 2014, it is likely that a summer lull will transition to an active IPO season in the fall," Burrill says. "There are 41 companies that have publicly filed to complete IPOs in the coming months."
Biotech stocks have also well outpaced the general market during the first six months of the year, despite a sell-off in late March and early April when growing concern about the cost of biotech drugs spooked investors. The issue, which had been brewing for some time, was brought front and center by the strong uptake of Gilead Sciences' new hepatitis C therapy Sovaldi, which offers significant advantages over existing therapies. Payers balked at the $84,000 price tag for a course of treatment for a drug that could be used on a large patient population because it could hurt their bottom line in the short term.
The Burrill Biotech Select Index was up 3.3 percent for June and is up 11.5 percent through the first six months of the year. That compares to 1.5 percent for the Dow Jones Industrial Average, 6.1 percent for the S &P 500, and 5.5 percent for the Nasdaq Composite Index.
BURRILL INDICES 12/31/2013 5/30/2014 6/30/2014 Month Change Year Change
Burrill Select 952.86 1028.38 1062.62 3.33% 11.52%
Burrill Large-Cap 1165.34 1246.62 1289.44 3.43% 10.65%
Burrill Mid-Cap 537.96 538.09 567.94 5.55% 5.57%
Burrill Small-Cap 143.25 196.38 212.97 8.45% 48.67%
Burrill Diagnostics 215.62 225.58 234.47 3.94% 8.74%
Burrill Personalized Medicine 150.29 166.89 184.76 10.71% 22.93%
NASDAQ 4176.59 4242.62 4408.18 3.90% 5.54%
DJIA 16576.66 16717.17 16826.60 0.65% 1.51%
S &P 500 1848.36 1923.57 1960.23 1.91% 6.05%
Amex Biotech 2330.43 2586.71 2776.28 7.33% 19.13%
Amex Pharmaceutical 468.07 511.06 522.94 2.32% 11.72%
NASDAQ Biotechnology 2369.53 2503.62 2686.41 7.30% 13.37%
BIOTECH SELECT INDEX BIGGEST MOVERS IN H1 2014
TICKER COMPANY PRICE 12/31/13 PRICE 6/30/2014 PRICE CHANGE PERCENT CHANGE
ADVANCERS MYGN MYRIAD GENETICS 20.98 38.92 17.94 85.5% ILMN ILLUMINA 110.59 178.54 67.95 61.4% VRTX VERTEX 74.3 94.68 20.38 27.4% MDVN MEDIVATION 63.82 77.08 13.26 20.8% ALXN ALEXION PHARMA 132.88 156.25 23.37 17.6%
EXEL EXELIXIS 6.13 3.39 -2.74 -44.7%
CLVS CLOVIS ONCOLOGY 60.27 41.41 -18.86 -31.3%
THRX THERAVANCE 35.65 29.78 -5.87 -16.5%
BMRN BIOMARIN 70.35 62.21 -8.14 -11.6%
While biotech performed well in the markets, it was a far cry from its performance in the first half of 2013 when the markets in general were more robust. In the first half of 2013, the Burrill Biotech Select Index gained 33.8 percent compared to the 12.6 percent gain of the Nasdaq Composite Index.
"The markets have outpaced the economy for the past 18 months and investors have become more cautious as valuations have grown," Burrill says. "Still, the expectation is that if economic indicators continue to trend up, the markets will remain robust. But raising money in the public markets will be tougher than it was in 2013."
Globally, life sciences companies raised $57.2 billion in public and private capital during the first half of 2014, up 1.6 percent from the $50.1 billion raised during the same period in 2013. While public company financings fell 3.4 percent, with follow-on offerings experienced a 26.6 percent drop, capital raised by privately held life sciences companies rose 42.3 percent.
Of the $8.8 billion raised by privately held life sciences companies, almost half a billion was in venture debt. Average deal size was $10.5 million, roughly the same as in the first half of 2013. Series A and seed stage financings accounted for $1.5 billion, or 16.5 percent of total funding during the first half of 2014. As has been found previously, the top 5 percent of deals accounted for 34.7 percent of the capital raised.
The top private company financing in June was completed by BGI Shenzhen, a subsidiary of the Chinese genomics powerhouse BGI that is focused on non-invasive prenatal testing. Unnamed Chinese institutional investors paid $320 million for a 20 percent stake in the company. A February 2014 ban on non-invasive prenatal testing by the Chinese government has put pressure on BGI Shenzhen's financials. In the United States, Proteus Digital Health raised $120 million to advance its digital medicines that integrate medications with ingestible, wearable, mobile, and cloud computing to inform better healthcare decisions that affect outcomes and costs.
Capital Raised by Life Sciences Companies in USD Millions
YTD 6-30-14 YTD 6-30-13 Change
Global Venture Capital 8,794 6,181 42.3%
U.S. VC 6,825 4,742 43.9%
IPOs (68 IPOs in 2014 vs. 29 in 2013) 4,731 4,744 -0.3%
U.S. IPOs (55 IPOs in 2014 vs. 23 in 2013) 3,877 4,618 -16.0%
Global PIPEs 3,169 2,055 54.2%
U.S. PIPEs 1,110 786 41.2%
Global Follow-ons 7,500 10,214 -26.6%
U.S. Follow-ons 6,482 6,989 -7.3%
Global Other Equity 405 618 -34.5%
U.S. Other Equity 297 526 -43.5%
Global Debt Offerings 29,744 26,581 11.9%
U.S. Debt 24,049 18,514 29.9%
Global Other Debt 2,837 5,862 -51.6%
U.S. Other Debt 1,139 3,169 -64.1%
Total Global Public Financings 48,386 50,074 -3.4%
Total U.S. Public Financings 36,954 34,602 6.8%
Global Partnering 25,091 16,106 55.8%
U.S. Partner/Licenser 13,429 12,234 9.8%
Global M &A 177,649 60,447 193.9%
M &A, U.S. Target 90,511 38,591 134.5%
Note: 2013 IPOs includes $2564M raised by Zoetis
M &A deal values jumped 194 percent between the first half of 2013 and the first half of 2014, driven by several multibillion dollar deals as the big biopharmaceutical companies and device makers awoke after a year of relative inactivity on the M &A front. In the face of unprecedented cost pressures, the first half's biggest deals were driven by strategies to sell assets in which they are not leading players and beef up areas of core expertise in order to be the dominant player in a sector, and seeking tax advantages provided by using offshore cash to buy companies and move headquarters outside the United States, called an inversion.
Companies that successfully completed such deals include the multibillion swap of assets between GlaxoSmithKline and Novartis at the end of April, in which Novartis will pay $16 billion for GSK's oncology assets and GSK will pay $7.1 billion for Novartis' vaccine unit excluding flu vaccines. Novartis also sold its Animal Health unit to Eli Lilly for $5.4 billion.
Medical device powerhouse Medtronic's $42.9 billion acquisition of rival Irish medical device maker Covidien in June, the biggest deal so far this year, will move Medtronic's headquarters to Ireland and allow it to save between $2 and $3 billion in taxes.
"Just a few years ago, Big Pharma saw diversification as the way forward for sustained revenue growth as it faced billions of dollars in revenue losses due to patent expirations," Burrill says. "Now companies are rethinking that strategy, concentrating on their core areas of expertise, and jockeying for the best strategy in the face of a changing healthcare landscape."
Although the largest pharmaceutical companies stepped up their game to acquire biotech companies, $6.1 billion in announced deal values in the first half of 2014 compared to $3.2 billion during the same period in 2013, these companies focused their efforts on large deals they failed to close. Pfizer couldn't reach an agreement with AstraZeneca even though it raised its offer to $117 billion from just less than $100 billion; Shire rebuffed three attempts by AbbVie to acquire the rare disease specialty pharmaceutical; and Allergan continues to fight Valeant Pharmaceuticals' $54 billion hostile takeover attempt.
"Because Big Pharma has externalized its R &D, it will continue to buy biotech innovation rather than build from scratch, but its recent focus seems more on merging with each other to minimize the tax burdens of doing business internationally," Burrill says.
June's biggest biotech M &A was Merck's $3.8 billion acquisition of Idenix to gain its three experimental hepatitis C drugs in clinical development. Merck paid a 238 percent premium for the biotech to beat out the competition and go up against Gilead's Sovaldi, among others. The drugmaker plans to combine Idenix' nucleotide prodrugs with its own experimental drugs to develop a three drug combo pill that it hopes will cure patients of the disease in as little as a month.
Global partnering disclosed potential deal values rose to $25.1 billion in the first half of 2014, 55.8 percent ahead of total deal values in the same period in 2013 as large drugmakers focused on discovery and preclinical deals to access innovative experimental drugs. Of the 77 deals with disclosed deal values during the first half of the year, 33 involved large pharmaceutical or biotech companies gaining access to biotech innovation.
Those transactions carried larger potential value, much of it payable if the drug is successfully commercialized, and represented nearly 61.6 percent of the total potential deal value at $15.5 billion.
Big Pharma drove June's largest deals. Mersana Therapeutics partnered with Merck Serono, the biopharmaceutical division of Merck KGaA, to develop next-generation antibody-drug conjugates in oncology in a deal valued at up to $792 million. Australian biotech Bionomics partnered with Merck for the development of its preclinical research program targeting cognitive dysfunction associated with Alzheimer's disease and other central nervous system conditions in a deal worth up to $526 million. It is the second agreement struck between the Australian biotech and the U.S. biopharma in less than a year and comes with a $20 million payment upfront.
The U.S. Food and Drug Administration's Center for Drug Evaluation and Research approved two new molecular entities in June, bringing to 19 the total number of new molecular entities approved by the agency since the beginning of the year. Cubist gained marketing approval for Sivextro for the treatment of acute bacterial skin and skin structure infections caused by susceptible bacteria, including MRSA. The drug was developed by Trius Therapeutics, acquired by Cubist in 2013. Valeant Pharmaceuticals got FDA marketing approval for Jublia, a topical toenail antifungal. Two biologics were also approved by the FDA: Biogen Idec's Eloctate, a recombinant factor VIII Fc fusion protein for the treatment of Hemophilia A, and MannKind's inhaled insulin Afrezza to improve glycemic control in patients with diabetes.
In June the FDA finally released regulatory guidance on how pharmaceutical and device firms can use social media on platforms to correct misinformation and the use of Twitter. Neither guidance makes it more likely that highly regulated industries such as biopharmaceuticals and medical devices will take to the social media airwaves any time soon. In the case of using Twitter, the FDA requires that the drug manufacturer present risk information at the same time as it discusses another aspect of the drug, and make it all fit in 140 characters.
Burrill Media produces publications and events focused on the global life sciences industry. Its sister company Burrill Equities is a diversified global financial services firm focused on the life sciences industry. By leveraging the scientific and business networks of its team, Burrill Equities has established unrivaled access and visibility in the life sciences industry. This unique combination of resources and capabilities enables the company to provide life sciences companies with capital, transactional support, management expertise, insight, market intelligence, and analysis through its investments, conferences, and publications. Headquartered in San Francisco, the company's global network enables it to assist companies worldwide. For more information visit: www.burrillequities.com.
Marie Daghlian Burrill Media 707-354-6441