Biotech IPO Boom Gaining Thrust With NantKwest Debut

A hot market for biotech IPOs is about to get hotter with the upcoming debut of NantKwest, a developer of cancer therapies that could set a record for market valuation.

NantKwest (NASDAQ:NK) will be the 51st initial public offering in the health care field this year if it prices Monday evening as planned. That’s more than triple the next most active sectors, technology and finance, with 15 IPOs each. Health care also had the most IPOs last year, at 102.

“We’ve had a great extended IPO window of opportunity for these companies to get financing from the public markets,” said David Miller, portfolio manager at Alpine BioVentures, which invests in public and early-stage private companies. “Companies are going from their first human trials to FDA drug approval faster than ever,” he said. “Part of that is the FDA is more understanding and companies are also smarter about drug development.”

NantKwest, which will adopt the ticker symbol NK, plans to raise $ 151 million by offering 7 million shares at a price range of 20 to 23. At the midpoint it would have a fully diluted market value of $ 2.2 billion. That would top a record set by biotech Juno Therapeutics (NASDAQ:JUNO), with a market valuation of $ 2.16 billion before its trading debut on its Dec. 19 IPO, according to Renaissance Capital, manager of the Renaissance IPO exchange traded fund.

An Industry Of M&A

There are several reasons for the surge in health care initial public offerings. Helping fan the flames are a record number of mergers and acquisitions, including some blockbuster deals.

These include the $ 8.4 billion that big-cap biotech Alexion Pharmaceuticals (NASDAQ:ALXN) paid to acquire Synageva BioPharma in a deal that closed last month. Synageva came public in December 2011. Another was the $ 3.2 billion that Teva Pharmaceutical (NYSE:TEVA) paid to acquire Auspex Pharmaceuticals, in a May pact. Auspex came public in February 2014. Another big deal was the $ 7.2 billion that Celgene (NASDAQ:CELG) this month announced it would pay to acquire Receptos (NASDAQ:RCPT). Receptos came public in May 2013.

Another reason is the strong flow of money coming from venture capital firms, as well as IPOs and follow-on offerings. Analysts also say that biotech companies are innovating at a pace never seen before.

“We’re now in a golden age of biotechnology,” said Paul Yook, portfolio manager of the BioShares Biotechnology Products Fund (NASDAQ:BBP) and Biotechnology Clinical Trials Fund (NASDAQ:BBC). “The capital is widely available and a record number of drugs are being approved.”

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