Since the 2012 signing of the Jumpstart Our Business Startups Act (JOBS Act), all biotech companies that have gone public have used the new IPO pathway in the law. Both company management and investors now are experiencing the benefits of the increased flexibility in the pre-IPO environment.
The JOBS Act gives emerging growth companies an “on-ramp” of five years to transition to the public market. Many emerging biotech companies have found that the newly-relaxedregulations have enabled them to generate investor interest and gauge the likelihood of an offering’s success during the new testing the-waters period before an IPO. Furthermore, the JOBS Act allows securities analysts and broker-dealers to publish information about growth companies going public and gives new issuers certain exemptions from costly compliance burdens.
What impact has the JOBS Act had on the biotech industry?
This year, price and performance have exceeded expectations with several IPOs more than double the initial offering price. Consider this data, which shows that the average pricing for the 23 US-based IPOs (as of 8/1) is four percent above the S-1 price range, representing a positive trend compared to previous years.
Performance, likewise, has been about as good as it gets, as the second data chartshows the price performance for all US-based IPOs since 2009. In 2013 so far, 18 of the 23 IPOs are above water. In contrast, we still do not see half the class of 2010 or 2011 in positive territory, and they have had more than two years to make strides in a period where the index (NBI) has doubled. With 23 US-based biotech companies in 2013, the sector is now ahead of any year since 2007.
An uncertain economy can be a tough time for biotech companies to go public, and venture capital investors who invest with the expectation that the company will go public had previously been are turning elsewhere to make their investments. Venture investor reluctance can lead to a decline in capital available for biotech companies at the exact time when capital s needed to fuel innovation and discovery.
Biotech companies routinely need millions, if not billions, of dollars of capital to fund their groundbreaking research, and the JOBS Act has allowed for tremendous growth in the sector. Ultimately, this is good news for everyone – sick patients and their families, employees at biotech companies, and investors.
Two prominent biotech company CEOs share their perspectives:
Chimerix, Inc.had a successful IPO in April 2013 using key provisions in the JOBS Act. In recent testimony, Chimerix President and CEO Kenneth Moch said:
“The public market plays a pivotal role in financing the search for groundbreaking cures and treatments, as growing innovators often turn to an IPO to fund late-stage clinical trials. At a time when venture capital financing of biotech is at an historic low, the ability to access public capital is increasingly important. We have seen the clear appetite for capital formation on the public market in the wake of the JOBS Act. The rise in biotech IPOs in the last year is a clear indication that public fundraising is fundamental in the search for groundbreaking medical advancements.”
Jeffrey Hatfield, President and CEO of Vitae Pharmaceuticals, a private company based in Fort Washington, Penn., provided testimonybefore the House Subcommittee on Capital Markets on the true cost of burdensome regulations on growing biotech companies:
“Congress passed the JOBS Act to help emerging growth companies transition onto the public market. This is already proving alluring to growing biotech companies as numerous companies have taken the step toward the public market. The interest in the JOBS Act from the biotech industry shows both the desire of growing biotechs to access the capital available on the public market and their reluctance to do so in the face of costly regulatory burdens, which delay medical breakthroughs for patients.”
Many small businesses in the biotech community have benefited from the JOBS Act by being able to focus on research and development rather than the onerous and burdensome regulations. The JOBS Act makes capital formation easier for small, emerging biotechnology companies, which allows these companies to focus on science and discovery that will ultimately lead to tomorrow’s breakthrough treatments and cures for patients who desperately need them. Over 30 emerging biotech companies have gone public using the JOBS Act.
The12th Annual BIO Investor Forum(October 8-9th, 2013 in San Francisco) will feature two panels on the public markets: an investor perspective and an in depth discussion with company management making the private to public transition. The BIO Investor Forum is the must attend event for companies setting their sights on IPO. In fact, 71% of the 2013 companies that have gone public have attended the conference.
For more information on emerging biotechnology companies, please visit http://www.bio.org/category/emerging-companies.