San Diego saw a banner year for IPOs in 2018, with seven companies making the jump to go public. The end of the year brought one last holiday gift for the metro, with two additional biotech companies making their debuts in late December.
By the number of deals, San Diego saw its best year for IPOs since 2014. It also saw a handful of sizable biotech deals, including two public offerings that fetched over $100 million in the second half of the year.
Nationally, the number of IPOs grew year-over-year, despite market volatility. A total of 205 U.S. companies went public in 2018, up 14 percent from last year, according to Ernst & Young LLP’s IPO report for the fourth quarter of 2018. The IPOs brought in combined proceeds of $52.84 billion, up 31 percent from 2017.
“In recent history, it’s as strong as it’s ever been,” said Tim Holl, a principal in Ernst & Young’s San Diego office. “Our best year was 2014. We had eight that year. … It’s turned out to be a very nice year in terms of being able to get some liquidity for these companies.”
Holl said the deals showed a continued appetite to invest in earlier stage companies. It also reflected San Diego’s continued strength in biotech — six of the seven IPOs were for life sciences companies.
The IPOs ranged from $19.5 million to $131 million. In early December, Synthorx, which is developing biologics to treat cancer and autoimmune disorders, announced it expected gross proceeds of $131 million from its IPO, which priced the company’s shares at $11 each. Crinetics Pharmaceuticals, which is developing a treatment for endocrine cancer, brought in another upsized IPO. The company exceeded its expected $80 million target, bringing in $106.4 million.
Two additional companies filed for IPOs at the end of the year: Cibus Global Ltd. and Gossamer Bio Inc. Cibus, which uses gene editing to select desirable traits for plants, hopes to raise $100 million through its offering. Gossamer Bio, a clinical-stage company that focuses on immunobiology, hopes to raise $264.5 million through its IPO, which it announced on Dec. 21.
The snowball of IPOs at the end of the year comes as biotech companies seek to put their name on the board before the annual JP Morgan Healthcare Conference on Jan. 7, which serves as a look-ahead for the industry. San Diego in particular continues to reap the strengths of its cluster of biotech businesses.
“As a community, there hasn’t been a tremendous amount of non-life-science IPOs in the last three to five years,” Holl said.
That could change in the next two years.
“In San Diego, there is a group of companies that will try to get out in the next 21-24 months and they’re not all going to be life science companies,” Holl said.
For example, Seismic Software Inc. has begun gearing up for its widely anticipated potential IPO. The company closed a $100 million funding round in December, which should be enough to carry the company to a public offering. Seismic’s executives has expressed interest in going public, though they have not confirmed a timeframe.
While continued market volatility could have a chilling effect on IPOs next year, Holl said headliner IPOs, such as Uber and Lyft, could draw more interest from investors.
Jackie Kelley, Ernst & Young’s IPO Market Leader, said exits from “unicorns,” or companies valued above $1 billion, would keep more deals coming in.
“A number of unicorn companies brought IPOs to market in 2018, with more on record stating that they will be conducting IPOs in 2019,” she said in a news release. “As we head into the new year, we expect IPO volumes to remain steady, driven by a number of high-quality issuers that have kicked off IPO processes.”