The forecast for biotech IPOs in 2017? Not nearly as hot as the industry would like

Print 11 January 2017
John Carroll / Endpoints News

Last year only 28 bio­pharma com­pa­nies man­aged to com­plete an IPO in the US, the worst record since the bad old days of 2012. And the smart money at Sil­i­con Val­ley Bank says you can ex­pect a re­peat, or maybe some­thing just slightly bet­ter, in the year ahead.

In other words, if you had to sum­ma­rize SVB’s IPO pro­jec­tion for 2017, a shaky thumbs-up is about the best you’re going to get. The conga line of 2014 and 2015 has dis­solved and shows no signs of re­form­ing any­time soon.

SVB called last year’s IPO num­ber in ad­vance, and with pub­lic biotechs still floun­der­ing in an un­for­giv­ing en­vi­ron­ment for risk, you’re not going to get much of an ar­gu­ment from any other an­a­lysts that they’re being overly cau­tious.

For those of you mak­ing the trek to San Fran­cisco this week for JP Mor­gan, you can ex­pect to hear plenty more about this topic. But even as the mood tends to run on the op­ti­mistic side in San Fran­cisco, re­al­ity is not being ig­nored.

SVB’s team, led by Jon Nor­ris, did get one thing wrong in its 2016 fore­cast. The num­ber of M&A deals in the sec­tor shrunk to 17 in 2016 — miss­ing a fore­cast for a surge that was also widely shared among an­a­lysts. This year, says SVB, look for 18 to 22 M&A exits, with half re­served for early-stage com­pa­nies, where most of the in­vest­ment ac­tion is these days.

Last year we saw a big run of Se­ries A in­vest­ments, where you’ll con­tinue to see plenty of em­pha­sis this year. One caveat, though: Crossovers, which have been back­ing off as the IPO wave dwin­dled to kid­die pool size, may start shift­ing their cash to back up their com­pa­nies as they get into B rounds.

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