The Quiet Outperformance of Recent Biotech IPOs

Source: Forbes, Bruce Booth (8/1/12)

"New biotech IPOs have quietly been putting points on the board with their post-IPO performance. It's now fair to say they have resoundingly outperformed their tech cousins in the public markets."

Forbes, Bruce Booth

Biotech IPOs have long been viewed with skeptism, especially over the past few years in comparison to the high-flying media darlings in the tech space. But recently a number of the social media phenoms have fallen from grace: Groupon is off 72%, Zynga is off 68%, and Facebook is off 44% as of today. Yet during the past 12–18 months, new biotech IPOs have quietly been putting points on the board with their post-IPO performance. It's now fair to say they have resoundingly outperformed their tech cousins in the public markets.

According to the National Venture Capital Association, 83 venture-backed IPOs occurred since January 2011 through the end of 2Q/12: 15 life science deals and 68 "technology" deals (which include social media, retail, software, etc.). I've taken a crack at examining the relative performance of these biotech versus tech IPOs, and here are the takeaways.

Biotech IPOs have massively outperformed tech in their post-offering trading. Biotech median and average percent change since IPO are +19% and +26% versus tech performance of -9% and +3%, respectively. This is ~2000+ basis points of outperformance—an impressive metric. To put that in perspective, asset managers often talk about beating benchmarks by 300–500 bps as a success, so this type of outperformance is remarkable. . .View Full Article

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