March 9, 2016
By Alex Keown, BioSpace.com Breaking News Staff
CAMBRIDGE, Mass. – After a tough public splash, shares for gene therapy company Editas Medicine has seen a huge turnaround, going against what has been the norm for biotech stocks so far this year.
Stock for Cambridge-based Editas hit a high today of $43.41 per share, a big jump, about 160 percent, from its initial pricing of $16 per share when it went public on Feb. 3. The company raised $94.4 million in its initial public offering, but fell into the same poor performance that’s mired the bulk of pharmaceutical stocks this year. So far this year, the S&P 500 Biotech Index is down about 20 percent and the Nasdaq Biotechnology Index is down more than 26 percent since the beginning of the year.
Although still years away from advancing its gene therapy technology to human clinical trials, Editas is defying the biotech stock odds in part due to exceptional management of its financing by investment bankers, as well as a little help from their friends, TheStreet’s Adam Feuerstein reported this morning. Kathleen Smith, manager of IPO ETFs at Renaissance Capital, told the Street that the IPO was made with help from “insider purchases.” Because a large share of stock is owned by these insider investors, they are prevented from selling the stock, which creates stability, as well as a small amount of outstanding shares, Feuerstein said. However, Feuerstein spoke to one hedge fund manager who said when Editas shares are able to be traded more freely, he anticipates the stock price to fall.
Of the newly public pharmaceutical companies, Editas is be defying the odds. Three other pharmaceutical companies offered IPOs this year and have typically been trading below the initial offer price. In February, Proteostasis Therapeutics went public at $8 per share and had been trading well below that, although this month it finally began trading above the IPO. This morning the stock is at $8.71 per share.
Few biotech companies that went public since 2013 have been performing well. In February, the Boston Globe reported that about 75 percent of the 142 biotechs that went public since January 2013 are now below their IPO prices. Atlas Venture partner Bruce Booth wrote on his Life Sci VC blog that the median stock for those 142 companies is down 35 percent.
At the start of the year, other healthcare companies announced their intentions to go public in bids to raise funds and test the strength of the market for new biotech stocks. Those companies were Corvus Pharmaceuticals, Editas Medicine Inc., Syndax Pharmaceuticals, Bavarian Nordic , Audentes Therapeutics and Rata Pharmaceuticals. So far though, Editas is the only company to go public.
The decline in pharmaceutical stock is driven primarily by several factors, uncertainty in the Chinese market, the price of oil and other macro factors, but also some industry specific concerns, such as Washington lawmakers who could reshape drug pricing policy. Earlier this month, lawmakers held hearings over drug pricing and questioned pharma executives from companies such as Valeant and Turing.
