Biotech IPO market activity has recently returned to levels not seen since before the financial crisis. This has been brought about in part by the accommodations afforded issuers under the Jumpstart Our Business Startup Act ("JOBS Act"). Under the JOBS Act, issuers that qualify as "emerging growth companies" ("EGCs") can take advantage of a number of IPO on-ramp accommodations, including (1) confidential SEC staff review of draft IPO registration statements, (2) scaled disclosure requirements (e.g., only two years of audited financial information (rather than three years) and reduced disclosure requirements for executive compensation), (3) an extended transition period to comply with new or revised accounting standards, (4) no restrictions on testing-the-waters communications with qualified institutional buyers and institutional accredited investors before and after filing a registration statement, and (5) an exemption from the requirements under Sarbanes-Oxley Act Section 404(b) to have an auditor attest to the quality and reliability of the issuer's internal control over financial reporting. Companies electing EGC status come from many industries, although the largest groups of EGC IPO issuers are from the biotech, technology, real estate, energy and healthcare industries. Since April 5, 2012, when the JOBS Act took effect, 112 biotech IPOs have been completed.
15 biotech IPOs have been completed thus far in the third quarter of 2014 and 61 biotech IPOs have been completed thus far in 2014 (raising approximately $4 billion in aggregate proceeds). At this pace, the biotech IPO market is on track to set new records for the number of biotech IPOs completed in the U.S. and abroad. With 30 biotech companies currently in the SEC registration process, there is no reason to believe that the number of biotech IPOs will substantially decrease in the second half of 2014. Whether these biotech companies decide to launch their offerings though will depend in part on the post-market performances of those biotech companies that have already gone public in 2014. Currently, the average share price performance of the 61 biotech companies that have gone public in 2014 stands at -4.5%, with the gainers and decliners about evenly divided. (Source: BioWorld Insight, August 11, 2014)
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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