The IPO market picked up slightly in the third quarter of this year, but conditions are still dismal overall and they aren’t expected to improve any time soon.
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A total of 25 companies went public in the most recent quarter, raising $2.4 billion, according to IPO research firm Renaissance Capital. Those figures are slightly above the totals for the second quarter, which saw 21 companies raise $2.1 billion in their stock market debuts. But the tally is still a far cry from the third quarter of last year, during which 94 IPOs raised $27.6 billion. The most recent quarter was the worst third quarter for IPOs since 2011, according to recent Renaissance report.
Third quarter IPO activity was driven primarily by small deals. Only three IPOs raised $100 million or more, according to Renaissance. The one biotech IPO crossing that threshold belonged to Third Harmonic Bio, which was able to price its shares at the midpoint of its targeted range and raise $183 million.
Cambridge, Massachusetts-based Third Harmonic is developing an inflammation and allergy drug licensed from Novartis. The biotech waited until it had some Phase 1 data to report before proceeding with its IPO, reducing some of the investment risk. That’s in contrast to many of the biotech IPOs of 2021 from preclinical companies. Third Harmonic shares have held steady so far, which is unusual for most newly public companies this year. In the third quarter, only two companies completed their IPOs above their offering price, according to Renaissance.
Volatile market conditions have kept many biotech companies from filing IPO plans. One exception is gene-editing biotech Prime Medicine, which submitted its IPO paperwork last week. Cambridge-based Prime has a pipeline of 18 programs, but all of them are very early in development—the only one with preclinical data is a sickle cell disease gene editing therapy in development under a partnership with Beam Therapeutics. Renaissance estimates that Prime’s IPO could reach up to $200 million, but it’s unclear whether investors in the current environment have the appetite for a biotech with so little data.
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In the year to date, 64 companies have gone public raising $6.6 billion. In the same period last year, 313 companies went public raising $107.5 billion. Renaissance noted that “a number of large IPO candidates” refreshed their prospectuses in the third quarter, keeping open their plans to go public. But the report also said not to expect a resurgence in IPO activity soon as companies continue to wait for improvement in market conditions.
“While there are some signs of life heading into the final stretch of 2022, we still don’t expect IPO issuance to begin normalizing until 2023,” Renaissance said.
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