Last year was a rebuilding one for the IPO market, according to Renaissance Capital. The IPO research firm counted 146 companies that went public across a range of industries. Those companies raised $29.6 billion, which was 50% more compared to the prior year. Even so, deal flow was slow as companies repeatedly pushed back IPO timelines amid uncertainty about interest rate cuts and other signs of economic volatility. Renaissance expects 2025 will be a better year for IPOs.
“While some may be skeptical that a pickup is once again ‘right around the corner,’ the IPO market has a stronger foundation now than at any point since the Covid bubble burst in 2022,” the firm said in its 2024 annual review. “High returns, renewed optimism, and a steady flow of private company news point to more deals on the horizon, and while we don’t expect a blowout year, IPO activity should finally normalize fully in 2025.”
Sante Ventures managing director Omar Khalil noted key differences in the kind of biotech company that can go public now versus a few years ago. Many companies that went public during the IPO boom were early stage or even preclinical. Some had what amounted to an interesting science project or scientific thesis that was not well supported by clinical data, he said. Investors welcomed these newly public companies in part because extremely low interest rates made it easy to invest.
The capital available to biotech companies has since become more constrained, Khalil said. Consequently, biotechs are more amenable to striking deals with big pharma. The fundamentals of investing in biotech are not revenue and profitability, but rather clinical data, he said. The companies best positioned to go public have one or more assets in late-stage clinical development. Companies that achieve clinical proof of concept against a well-validated target are able to raise capital to fund their research to late-stage development, Khalil said. But earlier-stage companies are still struggling to raise financing.
Macroeconomic factors could be key to shaping investment trends in the new year. Deloitte said 36% of survey respondents were evaluating the potential impact of inflation, economic recession, and supply chain and manufacturing disruption. According to Khalil, improving macroeconomic conditions could improve the investment climate.
“As inflation has gotten more under control and interest rates have started to come down, that’s started to loosen some of the capital that’s been stuck on the sidelines for some time,” he said.
There’s optimism for the life sciences in the coming year. Deloitte said 75% of survey respondents expressed that sentiment, based on their expectations for strong growth and margin expansion in 2025.
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