Here's an excellent piece by venture capital guy Bruce Booth, looking back at the heady days of 1991-1994. I can tell you that they weren't so heady in Big Pharma, but there were a lot of startups coming along. Included are some really big names of today, but also a lot of outfits that no one even remembers any more. And how have investors fared? That depends:
Only a subset of the 1991-1994 IPO window have accrued real value over time. There were certainly a few big winners in there – Gilead probably being the biggest, up over 100x since its IPO in 1992. MedImmune also fared quite well with its $16B acquisition (though AZ is not thrilled about it now), and Vertex is up 10x.
But let’s take the prior two examples, Isis and Amylin, which represent “successful” 20-year old mid-cap biotechs. Both have gone from preclinical stage companies around their IPOs to having products launched or filed with the FDA. But they haven’t really created any shareholder value over 20 years. Isis today trades at $8 per share, but it went public at $10 per share. Amylin went out at $14, but closed on the end of its first day of trading in 1992 at $21 per share. It now trades at $25. So for 20 years, these companies (and many, many others in the 1991-1994 cohort) have underperformed not only all major equity indices, but also treasury bills, and consumed billions in equity capital. And recall that many more companies from this window, probably at least half, ended up dying long whimpering deaths like long-forgotten Autoimmune Inc and Alpha-Beta Technology.
And that's a big reason why you don't see so many big biotech/small pharma IPOs any more. The markets are a different place, twenty years on:
The current reality, shaped by a couple decades of lackluster performance, is that the public markets aren’t open for business in biotech. While they are much less tolerant of the value-destroying tactics of the past (which is a good thing), they have also set the bar so high as to discourage even great, innovative companies from considering it as a viable option. In this new world, the old company building models just don’t work: it’s hard to back a startup today with an investment thesis around “we’re building the next Gilead” – the capital markets are just so different.
Small companies have to act differently, raise money differently, and sell themselves differently these days. Stay private, do as much virtually/outsourced, sell out to Big Pharma earlier than before. . .it's worth another post or two to talk about some of those models, but the "Let's Have an IPO!" one isn't going to be on the list. Not for some time to come, anyway.