Guest Column | March 15, 2016

New Report Outlines Biopharma IPO Trends

New Report Outlines Biopharma IPO Trends

Proskauer, an International law firm, recently released its newest IPO Study that includes analysis of market practices and trends for U.S.-listed IPOs. The study, conducted by the Global Capital Markets Group, examines data from 90 U.S.-listed 2015 IPOs with a minimum initial deal size of $50 million in the following sectors: healthcare; technology, media & telecommunications; energy & power; financial services; industrials, and consumer/retail.

Healthcare was the largest sector (33 IPOs) by deal count for the third year in a row. Of healthcare IPOs priced in 2015, 27 (82%) were by biotech or biopharm companies, 5 (15%) were by medical devices or diagnostics companies and 1 (3%) was by a hospital/clinical services company.

Fewer SEC Comments and Shortest Time To Pricing

In 2015, healthcare IPOs received fewer first-round comments compared to the average IPO in our overall study (24 vs. 31). This continues a trend of a decreasing number of comments, down from 30 in 2014 and 36 in 2013.

  • Healthcare issuers were more likely to receive a cheap stock comment than issuers in any other sector (73%, compared to 51% across all sectors), likely because biotech and biopharm companies more often use equity as pre-IPO compensation.
  • Healthcare issuers are also comparatively less likely to receive revenue recognition (33%, compared to 52% across all issuers) or segment reporting (3%, compared to 25% across all issuers) comments, both of which can lead to delays in the SEC process.
  • Comments in these areas would not be applicable to pre-revenue issuers. These patterns of SEC comments may partially explain the shorter time to pricing in this sector – in 2015, healthcare IPOs took an average of 118 days from the first confidential submission to IPO pricing, compared to an average of 147 days overall for all IPOs.

*Excludes prior SEC-reviewed issuers (two in healthcare, five overall) and an additional IPO with confidential submission to pricing greater than 18 months in overall.

Corporate Governance: Key Items

*Excludes FPIs (subject to home jurisdiction governance rules).

Controlled Company Exemption*
» 6 of 29 (21%) healthcare issuers were eligible for the controlled company exemption, compared to 42% in our overall study.

  • 5 of 6 (83%) elected to take advantage of the exemption.

Director Independence*
» 23 of 29 (79%) healthcare issuers had a majority of independent directors on their boards, compared to 68% in our overall study.

  • On average, these 23 had 76% independent boards.
  • On average, the remaining 6 issuers had 44% independent boards.4 of these 6 were controlled companies, and the other two took advantage of phase-in rules.

Separation of Chairman & CEO Roles*
» 22 of 29 (76%) healthcare issuers separated their Chairman and CEO roles, compared to 66% in our overall study.

Classes of Common Stock*
» 1 of 29 (3%) healthcare issuers had multiple classes of common stock, compared to 24% in our overall study.

IPO Fees and Expenses

Underwriting fees and total other IPO expenses (excluding underwriting fees) for healthcare IPOs are summarized below:

Legal fees, accounting fees and printing costs for healthcare IPOs are summarized below:

*Underwriting fees are the portion of IPO base deal that is paid as compensation to the underwriters in the form of a discount or commission.
**Total IPO expenses excludes underwriting fees.