Another eight biotechs IPOs raised a combined $502M last week - a new weekly record for the sector amid a rise in the Nasdaq biotech index (IBB) of 70% over the past year. The hot market has companies coming to market at earlier stages of drug development and - in the case of Dicerna Pharmaceuticals (DRNA -2%) which tripled on its first day of trading - without typical restrictions on insiders quickly cashing out.
Dicerna has yet to enter clinical trials for its liver disease and cancer drugs which typically means less than a 5% chance of them ever coming to market, according to industry analysts. Moreover, the prospectus says majority shareholders are under no lock-up restrictions. “I’ve never seen an IPO in my career where the existing [majority] shareholders . . . were not subject to a lock-up,” says one expert in the business who notes other firms are inquiring about following the Dicerna example. “A 180-day lock-up is one of those check-the-box provisions for investors," says Skadden Arps' Michael Zeidel.
The underwriters defend the arrangement, noting insiders bought about 50% of the IPO, and not having a lock-up should help with trading liquidity.
The market may already be stretched - of 14 companies listing so far this year, six are currently below their IPO price.