When Epizyme debuted in its initial public offering at the end of May 2013, the development-stage biotech company, which is
developing personalized cancer treatments, sold its shares at $15—the top of its target range—and finished its first day of
trading at $22.99, more than a 50% increase. Within its first week, shares traded above $30.
G. Steven Burrill
Including the underwriters' exercise of their overallotment, Epizyme raised a total of $88.7 million, more than the $60.2
million it was expected to raise had the offering been completed at the mid-point of its target range. It sold 5.9 million
shares, a million more shares than the company had planned to sell.
Epizyme's performance was a fitting finish to a month that saw a total of eight life sciences IPOs on US exchanges, the busiest
month for initial public offerings in the sector since August 2000 when 16 issues debuted, according to a Burrill & Company
analysis of S&P Capital IQ data. The eight life sciences IPOs in May nearly equaled the number of IPOs completed during the
preceding four months of 2013. At the same time, the queue of life-sciences companies filing to go public continues to grow,
reaching 17 at the end of May.
RENEWED INTEREST IN BIOTECH
The burst of activity is leading to familiar, if outdated, talk in both the trade and popular press of an "open window" for
biotech IPOs. Renewed interest in life-sciences IPOs is certainly welcome. Recent activity has created the best environment
seen for biotech IPOs in a long time, but it nevertheless remains a demanding market for companies seeking access to the public
markets. Biotech companies often need to price deals below their targets to get them done and venture investors routinely
must commit to purchasing sizeable portions of the IPO.
There are several factors that are driving the improving environment for life-sciences IPOs. Public market biotech stocks
have continued to show strength, outperforming the general market. Leading biotechs Amgen, Biogen Idec, Gilead, and Celgene
each closed at record highs at the end of the first quarter of 2013. Also pushing these stocks into new territory have been
significant developments, such as the regulatory approval of Biogen's new oral multiple sclerosis drug, and growing expectations
for Gilead's experimental hepatitis C drug.
The JOBS Act appears to have been a contributor as well. The legislation, passed in April 2012, eases regulatory demands on
emerging-growth companies seeking to raise capital through initial public offerings, allows emerging-growth companies to file
confidentially with the US Securities and Exchange Commission, and test the waters with investors to gauge their interest.
Most of the life-sciences companies to go public this year have done so under the provisions of the JOBS Act.
Table I: Performance of 2013 US IPOs.
Last, aftermarket performance of biotech IPOs has started to attract the attention of investors and warmed them to the prospects
of companies in the sector. The performance of the class of 2013 has been solid, with the new issues edging out the major
indices. Through the end of May, newly public companies are up an average of 20.9%. Of the 17 IPOs during the first five months
of 2013, 14 are trading above their IPO price and four are trading below.