New York’s Promise of High Rewards Reels In Europe Biotech IPOs

(Bloomberg) -- European biotech firms are flocking to the U.S. this year to raise equity capital, lured by the world’s largest pool of money and lofty valuations, with some skipping a listing in their home market entirely.

This month, four clinical-stage biotechs based in Europe have said they plan to float on the Nasdaq exchange in New York, including initial public offerings for drug developers Immunocore and Pharvaris, and a secondary listing for France’s Biophytis SA, which focuses on age-related disease therapies.

While European drug companies have a long-standing preference for U.S. markets, the trend has kicked into a higher gear this year. In all of 2020, nine such firms raised $1.2 billion in New York IPOs, according to data compiled by Bloomberg, blowing the $158 million they raised on continental exchanges out of the water.

“A European biotech listing in the U.S. greatly increases the total pool of capital available to the company versus listing locally in Europe,” said Zachary Brantly, head of U.S. investment banking at Berenberg, which worked on the Nasdaq listing of CureVac NV, a German company that’s developing a vaccine for Covid-19.

CureVac’s decision to go to New York has paid off, with the stock soaring 545% since its IPO in August. Biotech listings in the U.S. raised a record $18 billion last year and the new stocks have shot up 107% on average since their debuts. Overall, the Nasdaq Biotechnology Index has risen 37% over the past 12 months.

Immunocore has also decided to skip a London IPO for now. The Oxfordshire-based company, which has received funding from the Bill and Melinda Gates Foundation among others, is listing in New York to raise funds for a type of cancer treatment that uses the immune system to fight the condition.

Missing Out

“Too few London-focused investors recognize the opportunity on their doorstep and are missing out on the financial returns” of local biotech firms, said U.K.-based Steve Bates, chief executive officer of the BioIndustry Association.

For fledgling biotech companies, the U.S. market offers the advantage of a larger group of listed peers and broader coverage by a vast number of dedicated analysts.

“An increasing number of early-stage biotech firms are coming to market and investors are interested as long as they are adequately compensated for the risk,” Brantly said. The U.S. is especially attractive for companies that have multiple candidates in the pipeline and will require additional financing for continued development, he said.

The high-risk, high-reward strategy can also pay off in a big way in the U.K. British biotech Synairgen Plc, a developer of an experimental drug aimed at treating the worst symptoms of Covid-19, has risen nearly 2,000% in the past 12 months.

Still, the sector was hit by outflows of U.K. institutional money last year, Bates said. “Biotech is the industry of the future and a huge global growth opportunity; investors in the City should be establishing their in-house expertise to understand this sector and to avoid missing out.”