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Investors look to bet on biotech IPOs

It could be a busy two weeks for IPOs. 10 of the 15 on the docket are biotech and healthcare related companies including Carbylan Therapeutics, which is developing a treatment for osteoarthritis pain and healthcare analytic company, Inovalon which aims to raise $500 million. “We’re seeing of new filings coming up, half of them are biotech IPOs,” observes Kathleen Smith, principal of IPO ETF manager, Renaissance Capital.

Just last week Sparks Therapeutics (ONCE), which targets genetic blindness, raised $161 million in its IPO, pricing shares at $23, above the $19 to $21 expected range. Investors are hoping it can mirror the success of Avalance Biotechnolgies (AAVL). The company, which treats ophthalmic diseases, has seen its stock advance over 30% since its IPO last year.

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Moderna Therapeutics is another company worth watching. “Moderna, which has been the most highly valued in the pre-IPO market,” says Smith who notes its well funded. “That one recently raised about $450 million and now has $900 million of backing.”


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Many are hoping biotech IPOs will see a repeat of what was a strong 2014. Three of the top five IPOs last year were biotechs led by Radius Health (RDUS). The company, which specializes in treatments for endocrine-mediated diseases, has seen its stock advance more than 500%. Yet it wasn’t just IPOs that performed well, more established biotechs, as measured by the NYSE Arca Biotech Index (^BTK), rose nearly 60% last year. 

Related: Box unpacks hot year for tech IPOs

The investor demand comes, in part, because many of these companies could be on the cusp of developing the next blockbuster drug or therapy, making them potentially attractive to large pharma companies. “A lot of it is because there is M&A in the sector,” says Smith. Last August, Roche (RHHBY) paid $8.3B for InterMune which represented a 38% premium at the time.

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