Last week, GPCR biotech Septerna (SEPN) plummeted 47% after halting its lead candidate’s Phase 1 trial, just four months after the IPO. It’s far from the only recent biotech IPO to trade down substantially.
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Several 2024 biotech IPOs trade at least 80% below offer, though the biotech bloodbath isn’t limited to a few names: Of the 18 deals that raised at least $50 million, only 2 are above the offer price (CGON, AVBP). The group’s returns have been uniquely disappointing, down 52% on average, well below the average return of 16% for all sizable 2024 IPOs.
While many biotechs faded gradually in aftermarket trading, a handful suffered dramatic collapses due to poor results at the clinic:
- Obesity-focused BioAge Labs (BIOA) fell 77% on December 9, 2024, less than three months after its IPO, when it halted its Phase 2 trial due to elevated levels of liver enzymes in patients treated.
- CNS disorder-focused Alto Neuroscience (ANRO) fell 70% in late October 2024, after trial results showed its lead candidate, ALTO-100, failed to demonstrate effectiveness in improving depression.
- GPCR biotech Septerna dropped 47% last week, due to two “unanticipated” and “severe” instances of elevated unconjugated bilirubin in patients.
- Boundless Bio (BOLD), an oncology biotech focused on extrachromosomal DNA (ecDNA) biology, slid 58% during the month of June 2024. It later revealed that it was struggling to enroll patients for its lead candidate’s combination trial, and then stopped the trial of its second drug candidate following preliminary data.
- Kyverna Therapeutics (KYTX) slipped 34% in June 2024 when it unveiled trial results for its CAR-T cell therapy for autoimmune diseases. While it announced that most patients were able to stop taking their medications, investors raised concerns about 30% who needed to continue them.
In addition to poor results, biotechs can trade down when a similar drug fails or falls short in commercial adoption, or if a direct competitor posts superior results. Rising biotech valuations at IPO could also be a factor; over half of last year’s biotech listings were valued at $500 million or more, compared to 15% a decade earlier.
The broader biotech space has had tepid trading as well, with the Nasdaq Biotechnology Index off 8% over the past six months, compared to a 6% gain for the S&P 500. Biotechs sank shortly after the 2024 presidential election, as the administration’s proposed cuts to health research, criticism of Big Pharma, and vaccine skepticism spooked investors.
The trend isn’t limited to 2024 biotechs, either: all biotech IPOs over the past 5 years average a -41% return. While biotechs typically produce “barbell-like” returns balanced by a group of winners and losers, the barbell is heavily weighted toward the losers among biotechs that priced in the past five years.
2024 Biotech IPOs ($50m+ Deal Size)
Historically, biotechs have often managed to tap public markets even during periods of weak industry returns or a rocky IPO landscape. Generalist investors may flee the space, but biotech investors have shown a willingness to evaluate drug developers based on the science and market potential on a case-by-case basis. More recently, the enormous success of new weight-loss drugs may have changed the math for investors evaluating potential blockbuster therapies.
Still, the sheer volume of underperforming biotech IPOs in the past five years threatens to dampen demand, leading to lower IPO valuations or lower volume. If biotech IPOs continue to fall 50% on average, more investors will be reluctant to indicate on new deals.
For now, biotechs have continued to file for and price offerings. Cash-strapped drug developers rely on IPOs to raise much-needed capital in order to fund expensive trials, and so, unlike VC-backed tech unicorns, the prospect of a down-round does not deter biotechs from listing. Investor appetite hasn’t evaporated either, at least for the right story, as demonstrated by the strong trading of weight loss biotech Metsera (MTSR; +52%), which listed in late January.
Several biotechs are in the IPO pipeline, including autoimmune disease-focused Odyssey Therapeutics (ODTX) and eye disease-focused Aurion Biotech (AURN), deals that could both raise $100 million apiece.
