Dive Insight:

The rise of biotech IPOs that began early last decade marked the culmination of a “mature” biotech infrastructure built over decades in hubs like Boston and San Francisco, said Todd Berry, national leader in life sciences at the accounting and consulting firm BDO, in a recent interview.

That, combined with an aging population, an “insatiable” appetite for new therapies, and the ability of companies to privately “test the waters” for an offering because of the JOBS Act have each contributed to the stability of the IPO market, he said. Each of those factors have been talking points for years, though Berry said they’ve been bolstered by optimism in new scientific tools and technologies and the “money on the sidelines” to back them.

The result is biotech IPOs being supercharged over the past year. Berry believes the acceleration is a testament to the role drugmakers played in successfully developing vaccines and therapeutics for COVID-19, the support of the federal government, and what — perhaps until very recently— has been a friendly regulatory environment.

The positive financing environment has given rise to some hefty valuations for companies that have yet to prove their technologies. Cell therapy developer Sana Biotechnology, which raised $588 million in a near-record offering in February, was nearly a year away from its first clinical trial. Instil Bio hasn’t begun testing its treatments in humans either.

“There is certainly a part of this that you can look at and say, ‘Wow, do we have a little bit of a frenzy here?'” Berry said. “But I think it’s just where we are in the evolution of this industry. I think it’s here to stay for a while.”

The results in the first quarter of 2021 are a reflection of that sentiment. So far, the size and pace of initial stock offerings has blown past what was seen through March 19 in each of the last three years. Nineteen drug developers have priced IPOs of at least $50 million this year, averaging about $190 million per offering and raising about $3.6 billion combined, according to BioPharma Dive’s database. Sixteen of those biotechs trade at or above their IPO price.

Each of those numbers has increased significantly over the past few years. Eight biotechs, by comparison, had hauled in $1.3 billion by this time in 2020. And five had gone public in each of 2019 and 2018, picking up $678 million and $577 million respectively.

Cell and gene therapy makers have been among the biggest beneficiaries in 2021, with seven such companies going public — including the biotechs responsible for the three largest IPOs so far this year. Thirteen, by comparison, priced IPOs in all of 2020 and just four the year before that.

The clear uptick in such offerings has occurred despite the troubles cell therapies have had commercially, and more recently, the various clinical and regulatory setbacks faced by gene therapy developers. Each of them have gained value since their IPO, led by Vor Biopharma, whose shares are worth more than twice their $18 offering price.

“The setbacks,” Berry said, “haven’t quelled any of the optimism going forward.”