US Biotech Companies Raised Record IPO Funds Amid COVID-19 Pandemic...

94 Billion USD Raised Through IPOs in First 7 Months of This Year... Largest Since 1995 Statistics Compilation
Already Listed Bio Companies Also Secured 32 Billion USD Through Capital Increases

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] It has been revealed that U.S. biotechnology-related companies have raised a record amount of funds through initial public offerings (IPOs) this year. This reflects the heightened expectations for vaccine and treatment development triggered by the COVID-19 pandemic, although some express concerns about the risks associated with the high volatility of pharmaceutical stocks.

On the 10th (local time), The Wall Street Journal (WSJ) cited a survey by market research firm Dealogic, reporting that U.S. biotech companies have raised approximately $9.4 billion (about 11.15 trillion KRW) over the past seven months from early this year until the 7th, marking an all-time high. It added that this figure has already surpassed the previous annual record of $6.5 billion set in 2018.

The biggest incentive for biotech companies to attract funds was their stock prices. The stocks of biotech companies pursuing IPOs this year rose by an average of 34% on their first trading day. This was the highest first-day stock price increase since 2000, when the rise was 39%. The Nasdaq Biotechnology Index, composed of pharmaceutical companies and others, has risen 12% this year, significantly outperforming the S&P 500 Index's 4% increase.

The rise in biotech stock prices has continued even after the IPOs. Investors have high expectations for COVID-19 vaccine development, and it is anticipated that governments will increase investments in research and development (R&D) for the pharmaceutical industry as a result of the current situation. The market value of Moderna, a U.S. pharmaceutical company developing a COVID-19 vaccine, has surged from $7 billion at the beginning of this year to about $30 billion currently.

Biotech companies that were already trading on the stock market have also been able to raise funds easily amid the current situation. According to Dealogic, biotech companies have secured over $32 billion through capital increases this year, setting a new annual record, WSJ reported.

Investors are paying close attention to the remaining biotech IPOs this year. WSJ, citing sources, reported that German biotech company CureVac BV is scheduled to conduct an IPO on Nasdaq at the end of this month. CureVac, which is developing a COVID-19 vaccine, stated in documents submitted to financial authorities that it aims to raise $245 million through this IPO.

However, experts with extensive experience investing in biotech companies have expressed concerns that the market is excessively concentrated on healthcare-related firms. WSJ noted, "There are skeptical views on the current stock price surge, given that biotech stocks tend to be highly volatile depending on the success of key drug development."

Marshall Gordon, Senior Healthcare Analyst at ClearBridge Investments, emphasized that he is closely examining newly emerging companies in the market and intends to adopt a more conservative perspective when purchasing stocks. Although vaccine development is underway, many stages remain before actual market release, suggesting a cautious approach to future trends.