Kadmon (KDMN) raised $75 million (53% insider) on its IPO and proceeded to drop 19% on Wednesday, the year's second-worst debut. Kadmon is only the latest in a string of biotech IPOs that have disappointed. Of the 12 biotechs that have IPO'd since the second quarter began, 10 currently trade below issue (82%) and the group's average return is -15%, mirroring the poor performance of 2015's biotech IPO class (80% below issue; -26% average return). The first quarter's biotech IPOs have fared better, with only two of the seven below issue (29%) and an average return of 28%. Meanwhile, of the year's 30 non-biotech IPOs, just one (3%) is below issue, NantHealth (NH; -25%), and the group has an average return of 28%.
| Recent Biotech IPOs Have Underperformed | ||||
| As of 7/27/2016 | # of IPOs | # Trading above Issue (%) |
Avg. First-day Return |
Avg. Return |
| Biotech IPOs since April 1 |
12 | 2 (18%) | +4% | -15% |
| Biotech IPOs in the 1Q16 | 7 | 5 (71%) | 0% | +28% |
| 2016 non-biotech IPOs | 30 | 29 (97%) | +12% | +28% |
| 2015 biotech IPOs | 59 | 13 (22%) | +17% | -26% |
| 2015 non-biotech IPOs | 111 | 45 (41%) | +13% | -2% |
We note that three years into the biotech IPO boom, deals are increasingly leaning on existing shareholders: The average insider buying component disclosed by 2016 biotech IPOs is 40%, up from both 2015 (19%) and 2014 (23%). Along with poor returns from recent issuers, this could be a sign of waning demand for the once-hot space.
