Healthcare Companies Venture Back into Public Markets

By Jonathan Gertler, MD and Kyle Mak

Biotechnology capital markets are always sensitive to corporate earnings and macroeconomic outlook, and dependent on momentum from clinical trial readouts. Despite the ongoing turbulence in the sector—and with markedly less robust strength than in the tech markets—we have seen life science companies more willing to attempt entry into the public markets, in search of the necessary capital to continue their growth.

Figure 1: Biotechnology and medtech indices have lagged behind the stronger general markets which primarily have traded up on strong performance in the tech sector.

Despite the lackluster performance in the biotech and medtech sectors, as several key readouts for clinical trials near and the general markets become less volatile in response to easing inflation as well as a strong labor market, strong companies are seemingly better positioned to go public. In February, there were two biotechnology IPOs of note:

·      Mineralys (NASDAQ: MLYS) listing on the Nasdaq exchange with $192M in proceeds shortly after

·      Structure Therapeutics (NASDAQ: GPCR) raised $161M in proceeds in their upsized offering.

Mineralys Therapeutics

Mineralys is a clinical-stage company developing an aldosterone synthase inhibitor, lorundrostat, which demonstrated a clinically meaningful 9.6-mmHg and 7.8-mmHg reduction in systolic blood pressure in the 50-mg and 100-mg once-daily cohorts, respectively, in a phase 2 clinical trial. With proceeds from the IPO, Mineralys plans to initiate a phase 2 trial to evaluate lorundrostat as an add-on drug in patients with uncontrolled or resistant hypertension (uHTN/rHTN), as well as begin a phase 3 trial in 2H 2023.

With a phase 3 expected readout in mid-2025, proceeds from the IPO will be depleted before pivotal data, however, if the phase 2 trials go according to plan, the company will be well-positioned to raise more capital. The stock is down 2.8% since IPO.

Structure Therapeutics

Structure is focused on GPCRs, or G-Protein Coupled Receptors, and has a lead GLP-1R agonist in Phase 1 trial for type 2 diabetes and obesity. Pipeline includes one other clinical stage small molecule compound targeting cardiopulmonary indications. Thus, it is an earlier stage company than Mineralys and the news flow is not as robust but the area and core technology remains of great promise. Their stock is down nearly 15% since it started trading.

Though the subsequent stock performance will be the true mark of the appetite and the sector’s macro behavior, these examples of successful fundraising in the public markets come after a grim biotech/pharma IPO market in 2022 with less than 50 IPOs that raised a total of ~$4B in proceeds.

In 2021, there were 152 offerings with overall proceeds over $25B. In addition to IPO proceeds, follow-on offerings also took a hit in 2022 compared to record highs in 2021, largely due to the challenging macroeconomic climate and negative data readouts. In 2023, we expect more companies to test the waters in public markets as an option to access capital in an ongoing capital-constrained environment.

By Bhanvi Satija. Source: Refinitiv

However, although a source of “fuel in the tank,” public markets alone cannot be viewed as a central strategy.

Scientific advances always have the attention of investors even when they are sitting on the sidelines. In a tough market, attention inevitably turns to corporate development and business development initiatives.

Ongoing dialogues for partnering and co-development can prime companies for later public market strength even when the markets are currently forbidding. Prioritization of portfolio assets allows for cash conservation during a time when fundraising is challenging and also creates the highest likelihood of the news flow and positive outcomes on which companies can more effectively raise private or public capital.

M&A, partnering, and licensing activity in a down market usually accelerates. As we have stated in this space before, we expect that valuations will reflect the down market’s metrics on individual company value, the difficulty companies face raising capital, and valuation readjustments based on anticipated pricing pressure from current healthcare and drug development policies.  

In healthcare development, the science and technology that changes the quality of care ultimately prevails. And even in down markets there is cause for cautious optimism. Our selected deals show robust financing, public and private, across a number of therapeutic and clinical verticals and serve as a reminder that although challenging in this market, companies possessed of the right technology, targets, and leadership can succeed.

View Back Bay’s Healthcare Deal Roundup >>

Anticipating the science translates into anticipating the funding, deal activity and most importantly patient impact in our life science world.

Sources available upon request.