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Past VC Funding Likely Indicator of Strong IPO Market in 2019

Last year’s record amount of venture capital in San Diego life sciences paved the way for recent public offerings, with more likely ahead.

Often, venture rounds act as a precursor to an initial public offering, signaling 2019 could be another banner year for San Diego biotech IPOs.

Turning Point Therapeutics’ recent IPO raised $166.5 million, preceded by the cancer drugmaker’s $45 million Series C round last May.

“While the IPO market is always influenced by macro-economic trends such as the state of the US economy and the geopolitical climate, as well as the performance of the recent entrants into the market, we are optimistic that the record amounts of capital raised in San Diego during 2018 will lead to additional San Diego IPOs through the remainder of 2019,” Tim Holl, partner at Ernst & Young (EY) in San Diego, said in an email.

2018 $2.4B

San Diego-based biopharmaceuticals in 2018 raised a record high $2.41 billion in venture capital. The haul marked a jump from $632.2 million in 2017 and $520.03 million the prior year, according to Dow Jones VentureSource.

Gossamer Bio raised the second most venture capital during the year, pulling in $330 million through two rounds. (Samumed came in first with a $438 million mega-round.) Earlier this year came Gossamer’s IPO, in which the company added $276 million. It’s developing drugs in inflammation, oncology and other areas.

Government Shutdown

At year’s beginning, the IPO market started slow, on account of the December stocks plummet and parts of the government being closed.

As the shutdown dragged on, Gossamer pursued a fixed-price IPO to circumvent the government shutdown, but reverted to the conventional path when U.S. Securities and Exchange Commission employees returned. “The overall US market started off slow in 2019 as a result of the government shutdown, with 22 IPOs in Q1, but has picked up recently with an additional sixteen this month. While the larger unicorn IPOs such as Lyft, Pinterest and Zoom have garnered a lot of attention, there has still been an active market in the life science space, including in San Diego,” Holl said.

Three San Diego biotechs put in IPO paperwork in recent months, but have yet to take the plunge: Cirius Therapeutics, Cibus and Poseida Therapeutics.

Last year, Poseida brought in a $30.5 million Series B round. The company — which has a vision of developing single-treatment cures for certain cancers — recently postponed its IPO until later this year or 2020 in favor of a $142 million Series C round.

Cibus, an agriculture biotech that completed a $70 million Series C round in 2018, delayed its mid-February IPO. It cited market conditions.

Liver drugmaker Cirius in 2017 raised a $40 million Series A round, announcing plans to go public in January.

The march to an IPO doesn’t always begin with venture capital rounds. San Diego-based INmune Bio went public in February, bringing in $8.16 million, the company’s first major fundraising.

INmune Bio chose the strategy to keep control over management, and because the company expects its clinical trials will be relatively inexpensive.

Some companies that brought in large funding rounds in 2018 went public later in the year. They included Synthorx and Crinetics Pharmaceuticals.

Last year, seven San Diego companies went public, six of which were in life sciences, in a hot year for IPOs.

“Over the last five years, the most IPOs San Diego has seen in a given year has been eight, which occurred in 2014 when there was a very robust IPO market,” Holl said.

Jay Ritter, a professor at the University of Florida and IPO expert, said nationally in each of the last five years more biotechs have gone public than tech companies.

Ritter said biotechs have attracted greater amounts of funding for research and development as pharmaceuticals eschew internal pipelines.


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