The penchant for investors to jump into biotech IPO’s this year has grown at a fever pitch. New regulations and bleeding edge tech have sparked incredible favor within the space. Investors are willing to take on additional risks as more opportunities abound.
“Although biotech IPO performance hasn’t been great in 2015, we haven’t seen evidence of a major turn in the market–the Nasdaq Biotech Index has continued to climb–so we’d expect at least a modest amount of activity to continue,” said Greg Leffert, an analyst at Renaissance Capital, in a MarketWatch article.
Of the 240 IPOs in the past 12 months, biotechs represented about 25% of the newly minted stocks, with companies specializing in cancer and immunotherapy taking on the most appeal, according to data from IPOScoop and Renaissance Capital. In fact, The Nasdaq Biotechnology Index (NBI) rose 18% this year and more than 60% during the last 12 months. According to MarketWatch, the average return on biotech IPOs this year is about 14%, the NYSE Arca Biotechnology Index (BTK) has risen 200% since January 2011, and the S&P Healthcare Index gained 30% over a 12-month period; the best performing sector in the S&P 500.
Many are shrugging off fears of a potential bubble and actually chalking up the recent pace of progress to new changes in the industry through a fundamental approach versus pure speculation.