- The initial-public-offering market suffered through a slow start to the year due to the partial government shutdown and the brutal fourth-quarter for financial markets, but public debuts are ratcheting back up.
- While a host of high-profile unicorns and decacorns like Lyft, Uber, Airbnb, and Slack are all set to debut on the public market this year, healthcare has so far dominated the US IPO slate.
- It’s still early to compare the 2019 performance to prior years, but healthcare is the most active sector to debut on US exchanges this year, according to Renaissance Capital.
- The group’s showing in the first-quarter suggests a strong year ahead for biotech and healthcare, some analysts say.
Investors in private and public companies know there’s a massive slate of highly anticipated initial public offerings coming this year.
High-profile technology and transportation unicorns and decacorns like Lyft, Uber, Slack, and Pinterest are all set to debut on the public markets in the coming months after a sleepy first-quarter. A host of others, like Airbnb and Peleton, have also reportedly explored going public.
And even after a slow start start to IPOs this year — due in part to the partial government shutdown and one of the worst fourth-quarters on record — an overshadowed corner of the market is enjoying a strong run: healthcare.
The sector is the most active to debut in the US public market so far in 2019, followed by financials, according to data from Renaissance Capital. Healthcare was also the most active over the past year.
Investors’ excitement around newly public biotechnology companies suggests a strong year ahead after outperforming the broader US IPO market in 2018, said Oppenheimer analysts Jay Olson and Silvan Türkcan.
While it’s still too early to compare, initial IPO returns in the biotech space are positive so far this year. They’ve averaged 2% in about one month compared to 2018 IPOs returning 4% for the whole year, according to their analysis.
So far this year, 11 biotech IPOs have raised a total of $1.2 billion. Notably, those IPOs in 2019 have been predominantly in the cancer immunotherapy space, according to Oppenheimer’s analysis. The largest so far is Gossamer Bio, which raised $317 million.
“In discussions with investors, we have received favorable feedback and continued interest in 2019 Biotech IPOs,” they wrote.
Read more: The market for biotech IPOs is red hot — here are the top 10 of 2018
The relatively high number of healthcare companies coming onto the market isn’t just confined to the US. Globally, healthcare and technology were the most active sectors in the first-quarter, according to Ernst & Young data.
Between January and March, there were 45 IPOs in the technology space — the most of any sector — followed by the 32 in the healthcare sector.
So where is all this excitement coming from, and is it a sign of a group that’s overheating?
Put simply, and while trying not to sound “cliché,” Stifel biotechnology analyst Paul Matteis said there’s a widespread perception that science around drug development is improving and that investors want to get in on advances in different areas like gene therapy, neuroscience, and oncology.
“It’s still early days for leveraging some of the newer tools, like gene therapy and RNAi, that have emerged as vehicles to leverage science that’s improving across an array of disease areas,” Matteis told Markets Insider on Thursday, adding that companies feel like they have better access to capital.
“There’s been this expansion of tools to tackle and target specific genes,” he said.
Still, Matteis doesn’t think investor sentiment is near the uber-bullish heights of 2015. Between 2014 and 2015, investors saw a relatively high 50 to 60 biotech IPOs per year, according to Oppenheimer’s analysis.
The NASDAQ Biotechnology Index is up just over 13% so far this year, barely outperforming the S&P 500’s 12.8% gain. Meanwhile, the Health Care Select Sector SPDR Fund has gained 6% this year.
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