Biotechnology Initial Public Offerings Soar in 2013

New York—After several poor years, the biotechnology industry rebounded in 2013 with 45 initial public offerings (IPOs) of biotechnology companies and more money flowing into the sector. It was the most activity in the sector since 2000, and the trend has continued. So far this year, there have already been 14 IPOs, according to James Greenwood, president and chief executive officer of the Biotechnology Industry Organization.

Mr. Greenwood, who spoke at this week’s BIO CEO & Investor Conference, said there are now more than 900 biologic drugs in the pipeline intended to treat more than 100 rare diseases. He also presented results of a BIO survey of more than 200 buy-side investors conducted during the week of Jan. 23.

More than 56% of respondents indicated the major biotechnology indices would increase at least 10% this year. Two-thirds said small cap biotechnology companies were better investment opportunities than large biotech companies, while 65% preferred to invest in late-stage pipeline drugs over early-stage pipeline drugs. The best investment opportunities are in oncology (48.1% of respondents), genetic disorders/rare diseases (16.4%), and autoimmune/immunology (14.8%), according to the survey participants.

Mark Schoenebaum, MD, senior managing director at the ISI Group investment research firm, said the attention the biotechnology sector received in 2013 was “absolutely unprecedented” and “really remarkable.” A positive of so much money being available for biotechnology companies is that molecules have a higher probability of getting developed and approved, according to Oleg Nodelman, founder and managing director of EcoR1 Capital, a hedge fund. The FDA approved 39 drugs in 2012 and 27 drugs in 2013.

The panelists discussed reimbursement of expensive drugs, as well. Although drugs costs are high, they only account for around 10% of healthcare spending, according to Andrew Acker, CFA, portfolio manager at Janus Global Life Sciences. Adam Koppel, MD, PhD, managing director at Brookside Capital Partners Fund, said oncology drugs are still getting reimbursed, although he added that “something has to give” when it comes to the increasing costs. Dr. Koppel predicted that life-saving drugs such as rituximab or treatments for chronic myeloid leukemia would continued to get reimbursed in the coming years, but he was not sure about drugs that extend survival by a few months.—Tim Casey