Health

Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

Monday was a possibly record-setting day for biotech IPO announcements. Tuesday looks to have been the same for secondary offerings in the industry.

Eight different biotechs announced equity financing efforts that day, and another three announced on Wednesday. We only have pricing for some of the offerings, but Bloomberg puts the total amount firms hope to raise so far at more than $1.2 billion. 

The market was less than enthused: Every single one of the companies that filed on Tuesday traded lower on Wednesday, several of them down as much as 20 percent. No one quibbles with the idea that biotechs need to raise money to develop drugs or operate. But the timing seems off: These secondaries come in the middle of a nasty selloff in the broader market -- not exactly the most favorable environment. It is a far cry from the early part of 2015, when biotechs often saw big price gains after a secondary. 

It is at least slightly better timing than last autumn, when pharma and biotech were getting hammered. And the filings come just ahead of JPMorgan's health care conference next week, a good time to talk up a company trying to raise money.

Secondary Indeed
Investors have looked balefully upon biotech equity offerings this week.
Source: Bloomberg
Intraday times are displayed in ET.

The offerings are being priced at significant discounts, though: Oncology biotech Epizyme was trading at $15 before its announcement and priced at $9. Parkinson's drug developer Acadia was trading at $34 and priced at $29. And ear disorder drugmaker Otonomy priced at about an 18 percent discount. 

Such haircuts and the market's violently negative reaction to the offerings suggest that firms might want to hold off on raising cash in the stock market, if they can. And investors might want to take a closer look at firms who chose this particular moment to dip back into the equity trough.

There are reasons for both optimism and pessimism about biotech in 2016. While the wave of IPO filings raised some hope that investors are ready to place new bets, the wave of new share sales belongs in the downer column -- especially if the sales keep going as badly as they have started. Along with raising worries about diluting the value of existing shares, the new offerings seem to suggest some companies are scrambling to raise cash while they still can in anticipation of even nastier times ahead. 

Though Tuesday's action was unusually concentrated, such a flurry is not exactly unprecedented. The first week of 2015 saw 16 biotech and pharma secondaries, for about $1.5 billion. Cempra and Otonomy, which both filed this week, are habitual early raisers: Both held secondary offerings in the first week of 2015 as well.

Starting With a Bang
The first week of January 2015 also saw a wave of biotech offerings.
Source: Bloomberg

These aren't exactly bellwethers of biotech. Only one of Tuesday's eight filing firms, Acadia, exceeds $2 billion in market cap.

But if the flood of iffy offerings and market bad mood continues after the JPMorgan conference, or if it spreads to bigger names, then it might be a real signal of the rough year that some are beginning to expect.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Max Nisen in New York at mnisen@bloomberg.net

To contact the editor responsible for this story:
Mark Gongloff at mgongloff1@bloomberg.net