Biotechs line up for IPOs in bullish sign for US listings market

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Alumis and Upstream Bio, two US start-ups developing medicines for inflammatory diseases, have confidentially filed for initial public offerings as dozens more biotechs gear up to go public this year, according to people familiar with the matter.

The biotechs both submitted private filings with the US Securities and Exchange Commission in recent months, with a public offering expected before November’s presidential election which investors fear could roil markets, the people said.

In a bullish sign for the US biotech IPO market, dozens more life sciences companies have confidentially filed, according to advisers, undeterred by the poor performance of the 11 listings so far this year.

Alumis earlier this year completed a $259mn funding round — the biggest of the year — at a valuation of around $1bn, according to PitchBook, off the back of investor hype around its lead drug, which targets severe plaque psoriasis, a skin disease. Upstream’s lead drug helps to treat severe asthma, and is being studied in mid-stage trials. Both companies would probably list on Nasdaq, which is home to most biotech stocks.

The IPO market has been slow to recover after a sharp market downturn and rapid interest rate rises put most deals on hold in 2022, though there have been tentative signs of improvement in recent months.

Biotechs raised $1.7bn through US initial public offerings so far this year, up 64 per cent year on year according to Dealogic data. Fundraising by previously listed companies has rebounded faster, with so-called “follow-on” deals rising more than 100 per cent year on year to $16.5bn.

A revival in follow-ons is often seen as a key requirement to encourage riskier new listings.

Mike Perrone, a biotech analyst at RW Baird, said the listings market was much healthier than it had been for most of the past two years. But he cautioned that investor enthusiasm had dampened in the second quarter as traders pushed back expectations for how quickly the Federal Reserve will cut interest rates.

“People are being a little more guarded about new ideas . . . [new listings] will have to price in a way that is attractive to new investors,” he said.

Most of the biotechs that have listed in the US so far this year are trading below their IPO price. Bladder cancer specialist CG Oncology has been a notable exception, however, jumping around 80 per cent.

Johnson & Johnson-backed neuroscience start-up Rapport Therapeutics also had a good start to life as a public company on Friday, raising $136mn and climbing 22 per cent on its first day of trading. Australia-based Telix Pharmaceuticals also plans to list on Nasdaq in the coming weeks.

Given the patchy performance of recent deals, Perrone added that IPO candidates with less urgent funding requirements may choose to delay listing until after the presidential election, and to when there is more clarity over rate cuts.

Submitting a confidential public filing to the SEC does not oblige a company to list within a certain timeline, but it would put Alumis and Upstream on a footing to list quickly when a window opens. Alumis and Upstream declined to comment.

Alumis could also elicit some strategic interest before it goes public as its lead drug is in late-stage trials, and large pharmaceutical groups are hunting for drugs to replenish their pipelines.

“Anybody with a phase-three asset has a big target on their back . . . for obvious reasons,” said one person familiar with the company’s thinking.

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