NEW YORK – Coming on the heels of a flurry of initial public offerings (IPOs) – including a total of seven during the first week of February alone – the annual BIO CEO & Investor conference naturally was rife with commentary and predictions for biopharma activity in the public markets in 2014. Many industry observers, however, agreed that future IPO activity will depend largely on the performance of the Class of 2013.

Health care IPOs totaled 56 during last year’s IPO boom, for a total of $10.2 billion raised, reported Jonathan Kravetz, of Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, who moderated the meeting’s closing panel on fundraising in the new capital market environment. Those included 42 biotechs, six health care IT firms, five diagnostics companies and three medical device makers.

The numbers were similar to those reported by BioWorld, which tracked 39 firms that went public on U.S. markets in 2013. (See BioWorld Today, Feb. 10, 2014.)

RENEWED ENTHUSIASM

Reasons for the renewed enthusiasm for biopharma IPOs are myriad: generalist investors are coming back (many of them for the first time since the burst of the genomics bubble); biopharma drugs are experiencing successful market launches after years of slow commercial starts; biopharma indices have been performing exceptionally well across the board; and the advent of the JOBS Act offers reduced reporting requirements and test-the-water provisions that are particularly attractive to small firms. (See BioWorld Insight, Jan. 13, 2014.)

“We’re also seeing the benefits of the culling of the herd, so to speak,” said Ed Mathers, a partner at New Enterprise Associates.

The restructuring and cutbacks of recent years have resulted in fewer players, but the biopharmas who survived the downturn tend to be those with compelling science and products. Hence the IPO Class of 2013, most of whom were companies with late-stage products or large partnering deals – the traditionally ideal IPO-ready firms waiting only for the window to open.

But less-obvious-IPO companies also are taking advantage of the wide-open capital markets, including preclinical-stage companies such as Dicerna Pharmaceuticals Inc., an RNAi firm that priced a heavily oversubscribed IPO – and enjoyed an impressive debut on Nasdaq – last month. That kind of investor response for such an early stage firm likely would not have been only a few years ago. (See BioWorld Today, Jan. 31, 2014.)

Whether that opportunity will remain for biopharma will rely on several factors. The first is whether the Class of 2013 firms will hit value-driving milestones. Among those expected to disclose important clinical data this year are Regado Biosciences Inc., set to report the first of three interim analyses sometime in the second quarter for its phase III REGULATE-PCI trial testing antithrombotic drug, REG1, in patients undergoing percutaneous coronary intervention. Regado went public in August. (See BioWorld Today, Aug. 23, 2013.)

Top-line data from the phase II portion of a phase II/III study of multiple sclerosis drug RPC1063, a sphingosine 1-phosphate receptor modulator expected to compete with Gilenya (fingolimod, Novartis Inc.) also are expected in mid-2014. That drug is being developed by San Diego-based Receptos Inc., which priced its $72.8 million IPO in May. (See BioWorld Today, May 10, 2013.)

Meanwhile, Portola Pharmaceuticals Inc. is in pivotal trials with anticoagulant betrixaban in venous thromboembolism in acutely ill patients. According to Cortellis Clinical Trials Intelligence, that study is set to complete around the end of this year.

Another barometer of IPO success is follow-on offerings, noted David-Alexandre Gros, executive vice president and chief strategy officer at Sanofi SA, pointing to Macrogenics Inc. as a good example.

Rockville, Md.-based Macrogenics priced a follow-on offering Thursday last week, offering 1.8 million shares, with another 1.2 million offered by existing stockholders, at $36.50 per share. The company’s shares (NASDAQ:MGNX), which priced its IPO at $16 per share in October, were trading at $35.29 Thursday, a 120 percent jump from pricing. (See BioWorld Today, Oct. 10, 2013.)

Acceleron Pharma Inc. and South San Francisco-based Portola also have taken advantage of stock jumps post-IPO to raise substantial cash in secondary offerings. Acceleron, of Cambridge, Mass., brought about $120 million last month through the sale of 2.4 million shares at $50 per share, well above the IPO price of $15 per share. Meanwhile, Portola completed an offering of $105.9 million only five months after its IPO, priced at $14.50 per share, took a jump. The secondary offering was priced at $23.75 per share. (See BioWorld Today, Sept. 20, 2013, Oct. 18, 2013, and Jan. 24, 2014.)

OPENING OF THE LOCK-UP PERIOD

In terms of the bigger picture, however, last year’s pricings and the recent influx of back-to-back IPOs also will test the industry’s maturity. That will be especially true as lock-up periods reach their ends, with as much as $15 billion possibly hitting the market, noted Dennis Purcell, senior managing partner at Aisling Capital. “We’ll see if the market can handle it,” he said.

For his part, Purcell is optimistic. “I think people will try to do the lock-up in a more orderly fashion” than in prior years, “hopefully, not just dumping a lot of stock.”

Only five years ago, he added, investors didn’t want to get in on IPOs because “on day 91, the stock was in the market, and on day 91, you knew it was going to get killed.”

But in one of the promising investor trends, Purcell said, venture capitalists are holding on to biopharma stocks longer, willing to wait for future milestone-based events, and “LPs don’t seem to mind as much.”

Whether that investor patience is indicative of a more stable industry, however, remains to be seen. Purcell said the best change for the biopharma market would be a “flattening out,” instead of the roller coaster ride of past decades.

“The question is whether we can avoid that boom and bust [cycle], he said. “Because that has been tough on investors.”