Kadmon (NYSE:KDMN) raised $75 million (53% insider) on its IPO and proceeded to drop 19% on Wednesday, the year's second-worst debut. Kadmon is only the latest in a string of biotech IPOs that have disappointed. Of the 12 biotechs that have IPO'd since the second quarter began, 10 currently trade below issue (82%) and the group's average return is -15%, mirroring the poor performance of 2015's biotech IPO class (80% below issue; -26% average return). The first quarter's biotech IPOs have fared better, with only two of the seven below issue (29%) and an average return of 28%. Meanwhile, of the year's 30 non-biotech IPOs, just one (3%) is below issue, NantHealth ((NASDAQ:NH); -25%), and the group has an average return of 28%.
|Recent Biotech IPOs Have Underperformed|
|As of 7/27/2016||# of IPOs||# Trading |
above Issue (%)
|Avg. First-day |
|Biotech IPOs since April 1||12||2 (18%)||+4%||-15%|
|Biotech IPOs in the 1Q16||7||5 (71%)||0%||+28%|
|2016 non-biotech IPOs||30||29 (97%)||+12%||+28%|
|2015 biotech IPOs||59||13 (22%)||+17%||-26%|
|2015 non-biotech IPOs||111||45 (41%)||+13%||-2%|
We note that three years into the biotech IPO boom, deals are increasingly leaning on existing shareholders: The average insider buying component disclosed by 2016 biotech IPOs is 40%, up from both 2015 (19%) and 2014 (23%). Along with poor returns from recent issuers, this could be a sign of waning demand for the once-hot space.