What Do Biotech IPOs Say About the Market Today?

2015 started out strong for biotech IPOs, with many companies making impressive debuts.
However, the tides have turned, and IPOs are currently in a period of decline. In the past month, six pharmaceutical or biotech companies have gone public, and five of those companies priced below expectations. According to Dealogic, that is the most companies to price below expectations in a four-week period since the beginning of 2015.

Dimension Therapeutics’ disappointing IPO

Dimension Therapeutics’ (NASDAQ:DMTX) IPO is just the latest example of the market’s hesitation when it comes to biotech IPOs.
The US-based company develops novel treatments for rare diseases using gene therapy, while its adeno-associated virus vector technology allows for the systemic administration of gene therapy in vivo to treat a variety of single-gene diseases. Currently, Dimension is undertaking pre-clinical development activities for its work concerning hemophilia A; hemophilia B is another area of development for the company.

Hopes for recovery

While Dimension’s IPO was disappointing, it doesn’t spell the end for the company. Rather, it helps illustrate current fluctuations in the biotech space. 
Those become more obvious when looking at NovoCure (NASDAQ:NVCR), which went through a similarly challenging period after its IPO on October 5. The share price of the commercial-stage oncology company, which is currently engaged in developing an anti-mitotic treatment for solid tumor cancers, fell substantially on October 6, hitting a year-to-date low of $15.01.
The stock recovered to hit a high of $30.89 on October 13, but has been gradually falling ever since. On Thursday, it was trading at $19.15, down 5.2 percent from the previous day. 

Broader market contraction

It is not just biotech IPOs that are struggling right now. As well, the biotech market is going through a general period of difficulty — the NASDAQ Biotechnology index (NASDAQ:IBB) has fallen around 24 percent since hitting an all-time high this past July.
That said, it seems unlikely that this downturn is permanent. The biotech market has gone through similar periods of decline in the past, and has always come out ahead. The real question is whether investors want to stick it out in this challenging market, or to sell now and reinvest at a time of greater optimism. 
 
Securities Disclosure: I, Morag McGreevey, hold no direct investment interest in any company mentioned in this article.