Unless you’ve been stranded on a distant planet, you’ve noticed that equity markets have been hitting new highs lately, and that’s been accompanied by an increasingly robust capital markets environment, even including initial public offerings (IPOs). In fact, the current public healthcare IPO backlog stands at 14, with many more companies already confidentially initiating plans to pursue going public over the remainder of the year.
As recently as six months ago when we would meet with CFOs and CEOs of private companies (or their venture investors), they would have long lists of reasons why their company would never go public. The reasons included cost of capital, the hassle of being a public company, legal requirements, and compliance costs. All of these are particular burdens for smaller companies. In addition, if executives or investors were looking for an exit, they calculated better valuations if they sold to a strategic acquirer or private equity firm. An IPO was truly an option of last resort. Today, when we meet with these same constituents, we see a dramatic shift in their attitude towards going public.
Changing Tides for Healthcare Companies
So what has changed? The overall equity markets are much stronger, IPOs are getting done and trading up in the aftermarket and sentiment from the buy-side has become much more favorable. Some of this positive change has to be credited to the federal JOBS Act—a series of measures that allows private companies to become public in ways that are less burdensome and less costly.
Also, from a stock valuation perspective, the healthcare sector has been very strong. Over the past few years, lackluster markets were led by tech or financial stocks with many healthcare stocks lagging. Today, healthcare is now one of the top performing sectors in market. Thus, for a healthcare company considering an IPO, it is a good time to take advantage of this window of opportunity.
This opportunity is not limited to just small companies. For example, Bausch and Lomb, acquired by a private equity firm, has filed to sell shares to public markets again, and Pfizer’s animal health division recently went public. As private companies consider the many options they have to finance their next stage of growth, the IPO has once again become a viable option.
As part of our on-going “Wall Street Revealed” series, Westwicke is hosting a webinar highlighting the current state of the healthcare IPO market on May 23rd at 2:00 pm Eastern Time. Westwicke’ Mark Klausner will lead Grant Miller, Managing Director at Cowen and Company, and Matthew Perry, Portfolio Manager of BVF Partners L.P. (BVF), in a discussion on what the IPO market looks like now, and discuss some of the key valuation and execution trends. Please join us for this insightful discussion. Click here to register today!