Biotech Outlook 2021: IPO Craze to Continue Amid COVID-19 Recovery
After an up-and-down year for the market, what’s in store for the biotech space and its investors in 2021?
Click here to read the previous biotech outlook.
Investors looking at long-term developmental plays with a significant medical impact are well aware of the biotech investment proposal.
After a year centered on addressing challenges related to the global COVID-19 pandemic, the biotech sector may be ready to pick up steam again in 2021. A new wave of listings is expected, and industry insiders are projecting a better market for the new year.
Here the Investing News Network (INN) dives deeper into the biotech space and what may be in store for the sector in 2021, with firsthand accounts of the challenges present for this industry.
Biotech outlook 2021: Growth on the horizon?
2020 was rough for companies in the biotech arena, but 2021 may offer some relief in performance as vaccine rollouts potentially ease the struggles brought on by the coronavirus outbreak.
Karimah Es Sabar, CEO and partner at Quark Venture, an equity financing firm focused on innovative life science companies, told INN she sees an array of listings coming up that could create new opportunities.
“We expect more public offerings to continue in the biomedical sector, which will continue to thrive and attract investors, and particularly impact investors since many new drugs, devices and vaccines are life changing,” the venture capital executive said, touting the medical benefits of the biotech space.
Dr. Howard Verrico, founder and CEO of Sirona Biochem (TSXV:SBM,OTC Pink:SRBCF), expressed confidence in a successful COVID-19 vaccine rollout across North America, indicating that his firm is looking forward to 2021 as a period when it will continue adapting and overcoming challenges.
Despite operational obstacles, biotech stocks did show their resilience in 2020. Carried through by some of the biggest names in the space, indexes such as the iShares US Pharmaceuticals ETF (ARCA:IHE) and the SPDR S&P Pharmaceuticals ETF (ARCA:XPH) churned out significant gains for investors.
IHE ended with a 12.95 percent uptick in value for a 2020 closing price of US$179.44. Meanwhile, XPH closed the year with a price tag of US$52.06 thanks to a jump in value of 15.92 percent.
Biotech outlook 2021: IPOs and SPACs take center stage in the capital markets
Initial public offerings (IPOs) took the biotech capital markets by storm in the back half of 2020.
According to a report from FierceBiotech, the NASDAQ took in just over 100 healthcare IPOs for the year, resulting in US$23.6 billion raised. As the sector transitions into 2021, investors are wondering how strong the health industry IPO craze will be in the new year for biotech.
An annual preview report from research firm Evaluate lays out what it will take for the trend to continue.
“Throughout 2020, very early-stage companies managed to float at substantial valuations, with many offerings upsized,” the report indicates. “For this to remain the case in 2021, broader stock markets must stay buoyant and drug developers in demand.”
Kicking off the year, an IPO calendar from BioPharmCatalyst shows that two biotech IPOs are set to hit the market early in 2021: Gracell Biotechnologies and Cullinan Oncology.
Relatedly, special purpose acquisition companies (SPACs) have become one of the biggest trends in the capital markets at large, and biotech is no different. While Evaluate’s report doesn’t commit to the significance of the impact brought forth by SPACs, the firm does indicate that a large amount of these companies are expected to pursue the capital markets in 2021.
Evaluate warns investors that SPACs will be required to offer better terms to insiders, such as a bigger share of the ownership in a company post-float.
“For this recent financing trend to have longevity, or become anything other than a fringe financing option, Spac-floated companies must make progress. The jury is out for now.”
Biotech outlook 2021: Back to business for clinical trials
The pandemic affected work and life balances for virtually every industry. Aside from those obvious widespread impacts, research and development (R&D) in medical spaces faced difficulties, and one executive said he is looking forward to leaving that behind moving forward.
William Williams of BriaCell Therapeutics (TSXV:BCT,OTCQB:BCTXF) told INN that coming into last year he expected his firm to enroll patients for a critical advanced breast cancer clinical trial.
“Several research and development laboratories were forced closed for some time during the mandatory non-essential business closure due to the COVID-19 pandemic in the US,” Williams said.
The BriaCell president and CEO also noted that the number of patients willing to participate in clinical trials for cancer treatments declined because people wanted to avoid exposure to COVID-19 at hospitals.
Another biotech executive agreed with Williams, telling INN that some market players struggled to keep R&D going at such a turbulent time.
“There were delays, and business development activities slowed as both large and small companies adapted to the new work environment,” said Sirona’s Dr. Verrico. The executive told INN his firm moved forward with a clinical trial in October 2020.
For now, BriaCell and several other biotech firms working on research of their own are pinning their hopes on the distribution of approved vaccines across the world.
“We expect the mandatory restrictions for the R&D laboratories (i.e. non-essential businesses) to ease up in the US,” Williams explained to INN.
As the rollout of the vaccines across North America continues, investors may see a return to form from companies working on studies and other developmental phases to help strengthen their pipelines.
Biotech outlook 2021: Investor takeaway
One thing that’s clear for biotech investments in 2021 is that the year will be a time of new beginnings, whether that comes from new companies joining the public markets and giving investors fresh opportunities, or existing companies picking up on business opportunities.
Investors will face a busy year in which companies will continue to face significant challenges from the new landscape created by COVID-19.
Don’t forget to follow @INN_LifeScience for real-time updates!
Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: BriaCell Therapeutics and Sirona Biochem are clients of the Investing News Network. This article is not paid-for content.
The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.