Kadmon Plummets 19% On Offering; 10 Of 12 Biotech IPOs Since April 1 Are Below Issue

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Includes: KDMN, NH
by: Renaissance Capital IPO Research

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
Return
Avg. Return
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.