The biotech industry is enjoying the strongest IPO market since 2000 with more than 30 new offerings already this year. Our firm alone, Polaris Partners, has seen four successful IPOs in our portfolio, with several more hopefuls on the horizon.
Biotech stocks have gained more than 40% in the past year, outperforming established pharmaceutical companies, a move that underscores the attraction of healthcare innovation to investors. It’s a market dynamic that has not gone unnoticed by industry observers.
Now the question everyone is asking is this: Will the biotech surge last?
Some say it’s a bubble which will burst, like the genomics bubble just over a decade ago. They note the long-term trend of large pharma spending more money to make fewer drugs (and suggest that if they are smart, they will start pulling out of the research business), as well as the inevitable push by insurance companies to lower costs.
Then there’s the “Bernanke Effect”—the impact of low interest rates on markets—which has triggered large flows into the equity markets and allowed biotech companies such as Amgen, Biogen Idec and Celgene to buy back shares, temporarily boosting stock prices.
It’s prudent to consider the long-term headwinds, as well as the short-term factors that swing stock markets. But those of us at the front lines of biotech innovation—scientists, entrepreneurs and investors—offer another perspective. And that is that critical new therapies are changing the lives of patients at a faster pace than ever, and these advances have real commercial prospects.
Investors can “do well by doing good,” but it takes commitment first to stakeholders, then to stock holders. In other words, the sustainability of the biotech market depends on a belief in the positive impact investments have on the lives of patients.
Those companies that provide the greatest human benefits are being rewarded and are creating significant value for investors.
Some life-altering medicines have come to market in the past few years in this virtuous cycle of human and economic value, addressing a broad range of diseases. Thanks to Vertex’s drug Kalydeco, for example, children suffering from cystic fibrosis now have hope that they can lead healthy lives.
The millions of patients subject to the pain and embarrassment of Irritable Bowel Syndrome can look to Ironwood’s drug Linzess for relief. Severe asthma sufferers are being aided by a novel therapy developed by a small company called AsthmatX, now owned by Boston Scientific.
And patients that were resigned to living their lives on antihypertensive drugs have a therapy developed by venture-backed startup, Ardian, that is now owned by Medtronic.
Every day, medical discoveries are being funded and developed. AIDS has changed from a death sentence to a manageable, chronic disease, multiple sclerosis patients have access to near cures and fewer side effects for what is a life-long, debilitating condition, and we have made significant strides in treating cancer.
In turn, the companies that have spearheaded these discoveries have been rewarded. Those that executed successful IPO’s in 2013 include leaders in stem cell biology (Fate Therapeutics), nanomedicines (BIND Therapeutics), novel cancer biology (Epizyme, Agios and Foundation), gene therapy (Bluebird Bio) and novel protein therapeutics (Acceleron).
At no time in history has a patient had more hope for a cure. And with the pipeline of biological discovery building in universities around the world, the value of companies that can bring these treatments out of the labs and into the market is growing.
Stock markets will rise and fall, but innovation will always prevail.
Whether the 2013 IPO biotech market is a flash in the pan or a true paradigm shift is a less relevant question than whether there is demand for the vast array of medical diagnostics, treatments and cures now being developed. Our answer to that has always been a resounding yes, regardless of where the Dow Jones Industrial Average is trading.
Doing well by doing good. That’s an investment approach we can all live with… and comfortably, at that.
Amir Nashat is managing partner in the Boston-based office of Polaris Partners. He can be reached at firstname.lastname@example.org.
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