It's been a long time since we've witnessed 11 biotechs successfully completing their initial public offierings (IPOs) on the U.S. market during the first five months of the year. That number only usually accrues in the space of a year. In fact you have to go back to 2007 when 13 biotech IPOs were completed in the same period. The IPO market has certainly taken off big time this year and biotechs are rushing to take advantage of the favorable environment.

So far, according to BioWorld Snapshots, biotech IPOs have generated a total of $742.75 million, not far short of the $749 million raised from IPO financings in the whole of 2012.

And more are still in the works.

What's changed to generate such an interest in new biotech issues? It appears to be a function of the sustained investor interest in biotechnology.

"It has been a very interesting confluence of events and market performance," John Chambers, head of Healthcare Investment Banking at Roth Capital Partners LLC, told BioWorld Insight.

"Given the stronger public market performance, many public biotech companies have seen their stock valuations increase. This is leading investors to take additional liquidity risk by participating in IPOs for greater return. This all plays out when investors see IPOs performing more positively as a group."

Hectic Few Months

In the last couple of months eight IPOs have been completed and six companies added themselves to the IPO runway. For example, Bluebird Bio Inc. and Esperion Therapeutics Inc. recently filed their S-1s with the SEC; both filed as emerging growth companies under last year's Jumpstart our Business Startups Act. (See BioWorld Today, May 17, 2013.)

Cambridge, Mass.-based Bluebird is looking to raise $86.3 million in its proposed IPO, with proceeds going to fund upcoming trials of its lead gene therapy candidates. Bluebird's treatment approach involves the use of stem cells harvested from a patient's bone marrow. Using a lentiviral vector, a functional version of the disease-causing gene is inserted into the stem cells, which are grown in culture and then delivered back to the patient, ideally enabling the patient's body to function properly.

The most advanced program, LentiD, is set to start a Phase II/III study late this year in childhood cerebral adrenoleukodystrophy (CCALD), a disease caused by the buildup of fatty acids that damages the myelin sheath. LentiD is designed to transduce a patient's hematopoietic stem cells with the lentiviral vector encoding ABCD1 cDNA, the gene that provides transport function in brain cells for clearing up those fatty acids.

In its S-1 filing, Esperion is looking to raise $70 million to boost work on its oral small molecule for lowering low-density lipoprotein cholesterol (LDL-C). The company, which originally started out in 1998 and was acquired by Pfizer Inc. for $1.3 billion in 2004, began its second life when the big pharma spun out the firm and lead asset ETC-1002 in 2008. (See BioWorld Today, May 2, 2008.)

Epizyme Inc., of Cambridge, Mass., set terms for its IPO, aiming to sell 4.3 million shares at a price range of $13 to $15. At the midpoint, the firm would raise about $60.2 million, which would support its epigenetics platform. (See BioWorld Today, May 22, 2013.)

Also joining the IPO runway is South Plainfield, N.J.-based PTC Therapeutics Inc., which is focused mainly on genetic disorders but also has preclinical and discovery-stage assets in oncology and infectious diseases. In its filing, the company said it plans to use proceeds from the IPO to fund the clinical development of lead candidate ataluren (formerly PTC124) in Duchenne's muscular dystrophy caused by nonsense mutations and cystic fibrosis caused by nonsense mutations, to seek marketing approval of ataluren in the indications in the U.S. and European Union, to pursue the drug's development in additional indications and to fund other research and development programs.

IPO Graduates on a Tear

It is likely that we will see many of these companies complete their IPOs in the not too distant future given the stellar post-market performance of the 11 2013 biotech graduates. BioWorld Insight found that, as a group, the collective share prices have grown by an average of 24 percent.

Leading performers to date have been Stemline Therapeutics Inc. (up 67 percent), Omthera Pharmaceuticals Inc. (up 65 percent) and Chimerix Inc. (up 58 percent).

Chimerix Inc., of Research Triangle Park, N.C., priced its IPO at $14 per share, and its stock rocketed up quickly to well over $20 per share. The company overshot its $75 million goal, raising over $133 million including overallotments for underwriters. Investors were impressed with the company's significant results in Phase II trials with its antiviral CMX001. Made by way of the firm's lipid-based delivery approach to carry the payload of cidofovir-diphosphate (CDV-PP) to intracellular sites, CMX001 was tested in a Phase II experiment that enrolled 230 patients getting hematopoietic stem cell transplants, and yielded a lowering of more than 50 percent in risk of cytomegalovirus in patients given 100 mg twice weekly compared to placebo. (See BioWorld Today, April 2, 2013.)

Princeton, N.J.-based Omthera Pharmaceuticals Inc. has ongoing Phase III trials with Epanova, the purified mix of free fatty acid forms of eicosapentaenoic acid and docosahexaenoic acid – a proven winner in Phase III trials, tested as an agent for patients with very high triglycerides. At the 2-mg dose, the drug did well enough, but a higher dose brought the real magic, providing a 7 percent reduction in non-HDL-cholesterol and a 21 percent drop in triglycerides. A positive effect turned up, too, on the other markers of cardiovascular risk, including ApoC-III and LpPLA2. (See BioWorld Today, March 12, 2013.)

"Deals have worked in the aftermarket, which has mitigated the risk investors previously used in discounting IPOs. As deal performance has been positive, investors have more confidence that the IPO valuation discount factored in by underwriters will be recaptured providing a more immediate lift in the company conducting its IPO," added Chambers.

Biotech Remains Hot

In addition to the biotechs that have completed IPOs, the biotech sector is still a hit with investors. Year-to-date the sector has continued its significant momentum with the BioWorld Stock Report recording an average 21 percent increase in for the stock prices of the 243 biotechnology companies that the report tracks. This compares to a 16 percent increase for both the Nasdaq Composite Index and the Dow Jones Industrial average for the same period.

Blue-chip biotech companies continue to lead the way. Gilead Sciences Inc. and Amgen Inc., the top two companies by market cap, for example, have seen their share prices increase by 52 percent and 23 percent respectively.

With all eyes focused on American Society of Clinical Oncology (ASCO) meeting in Chicago this week there will be plenty of news to keep investors engaged and it is expected that biotech will end the second quarter on a roll.