Bausch + Lombs’ $630 million IPO was the largest in the second quarter of this year. It was also an outlier. The sharp decline in IPO activity continued over the past quarter, which saw the number of completed new equity offerings fall to levels last seen during the Great Recession of late of the 2000s.
The 21 IPOs that raised $2.1 billion in the second quarter made it the slowest second quarter for IPOs since 2009, according to a new report of research firm IPO Renaissance Capital. By comparison, the second quarter of last year saw 118 new public companies raising $40.7 billion. It turned out to be the top. IPOs fell in the third and fourth quarters of last year. In the first quarter of this year, activity fell to just 18 IPOs. Renaissance said factors holding back new IPOs include recession fears and record inflation.
New issuers are still waiting for better terms and significant IPO activity is unlikely to resume until yields improve, Renaissance said in the report.
Large life science IPOs in the second quarter are exceptions. Bausch + Lomb is a well-known brand with a broad portfolio of eye care products marketed worldwide. It’s also no stranger to public procurement. Bausch + Lomb was listed on the New York Stock Exchange for nearly 50 years until it was acquired by private equity firms in 2007. HilleVax raised $200 million in its IPO. Although the vaccine developer is not as well-known as Bausch + Lomb, it spun off from pharmaceutical giant Takeda Pharmaceutical with a norovirus vaccine candidate that has already successfully demonstrated proof of concept in phase 2 testing in adults. . Both companies are less risky investment bets than some of the start-ups that have attempted to go public.
HilleVax priced the shares in the middle of its target price range, and the company was able to increase the deal size by offering more shares. However, Bausch + Lombs’ strong balance sheet and business growth were not enough to offset the dampening effects of financial markets. The company priced its IPO at $18 per share, well below the $21 to $24 per share range the company had set for itself. PepGen, a biotech in early-stage clinical development, was able to raise $108 million through its IPO. But the genetic drug delivery company priced its stock offering below the target price range, so it had to sell more shares to break the $100 million mark.
A year ago, an IPO exceeding $100 million was common. In the second quarter, only six IPOs crossed this threshold. The median deal size in the second quarter was $22 million, which Renaissance said marked a multi-decade low. The company calculated that only 25% of newly listed companies ended the second quarter above their IPO prices. Shares of Bausch + Lomb, HilleVax and PepGen are all trading below their offer price.
Financial conditions continue to hamper new IPO efforts. New deposits fell to their lowest level in six years, Renaissance said. The pipeline of companies that have already filed remains full, even if it is not moving much. In some cases, companies are postponing IPO plans indefinitely. Bausch Health Companies, the company that acquired Bausch + Lomb and adapted its name before moving into eye care, also planned to spin off the skincare business named Solta Medical. Last month, Bausch Health said it was suspend Solta’s IPO, citing the tough market conditions. The SPAC agreements are no better. While such deals were hot in 2021, Renaissance only had 15 white-glove IPOs and 19 completed mergers in the second quarter.
The sluggish financial conditions are pushing some listed companies to pursue alternative financial strategies. Radius Health goes private via a buyout by two private equity firms. In explaining the rationale for the deal, company executives cited tough markets, especially for biotech companies. Blueprint Medicines has found a way to raise funds without tapping into the financial markets. Last week, the company agreed to give up some of the royalties it owed for two cancer drugs in exchange for $575 million at the close of transactions. In future years, these funding deals could bring Blueprint to $1.25 billion in total capital.
Photo: Angela Weiss/AFP, via Getty Images
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