Bausch + Lomb’s $630 million IPO was the largest in the second quarter of the year. This is also an outlier. IPO activity continued to decline sharply in the most recent quarter, with the number of completed new offerings falling to levels seen during the Great Recession of the late 2000s.
Twenty-one IPOs raised $2.1 billion in the second quarter, the slowest second-quarter IPO since 2009. new report From Renaissance Capital, an IPO research firm. By comparison, 118 newly public companies raised $40.7 billion in the second quarter of last year. It was the peak. The number of IPOs declined in the third and fourth quarters of last year. IPO activity plummeted to just 18 in the first quarter of this year. Factors holding back new IPOs include recession fears and record inflation, Renaissance said.
“New issuers are still awaiting better conditions, and meaningful IPO activity is unlikely to resume until returns improve,” Renaissance said in the report.
Large life science IPOs in the second quarter were the exception. Bausch + Lomb is a well-known brand with a broad portfolio of eye care products commercialized worldwide. It is also no stranger to the public markets. Bausch + Lomb traded on the New York Stock Exchange for nearly 50 years until it was acquired by a private equity firm in 2007. HilleVax raises $200 million in IPOWhile the vaccine developer isn’t as well known as Bausch & Lomb, it spun off from pharmaceutical giant Takeda to launch a norovirus vaccine candidate that has successfully demonstrated proof-of-concept in Phase 2 testing in adults. Both are less risky investments than some early-stage companies trying to go public.
HilleVax priced the stock at the midpoint of its target price range, and the company was able to scale the deal by offering more shares. However, Bausch & Lomb’s strong balance sheet and growing business were not enough to offset the dampening effect of financial markets. The company priced its IPO at $18 a share, well below the company’s range of $21 to $24 a share. PepGen, an early-stage clinical development biotechnology company, was able to raise $108 million from its IPO. But the gene-drug delivery company priced its stock below its target price range, so it would need to sell more shares to break the $100 million mark.
A year ago, IPOs over $100 million were common. In the second quarter, only six IPOs crossed that threshold. The median deal size in the second quarter was $22 million, which Renaissance said was the lowest in decades. The company calculated that only 25% of new public companies closed the second quarter above their IPO price. Bausch + Lomb, HilleVax and PepGen are all trading below their IPO prices.
Financial conditions continued to dampen new listing efforts. Renaissance said new applications had fallen to a six-year low. The pipeline of companies that have already submitted applications is still full, even if it hasn’t changed much. In some cases, companies postpone IPO plans indefinitely. Bausch Health Companies, the company that bought Bausch + Lomb and changed its name before spinning off its eye care business, also plans to spin off a skin care business called Solta Medical.Last month, Bausch Health said Suspended Solta IPO, citing challenging market conditions. SPAC deals aren’t doing any better. While such deals are hot in 2021, Renaissance only counted 15 blank-check IPOs and 19 M&A deals in the second quarter.
Dismal financial conditions have led some public companies to seek alternative financial strategies. Radius Health to go private through acquisition of two private equity firmsIn explaining the rationale for the deal, company executives cited a tough market, especially for biotech companies. Blueprint Medicines found a way to raise money without tapping into the financial markets.Last week, the company agreed to sign some of the royalties it owes on two cancer drugs In exchange for $575 million at the close of the transaction. These financing agreements could bring Blueprint’s total capital to $1.25 billion over the next few years.
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