The win­ners and losers of the Swedish biotech in­dus­try IPO fren­zy

With a to­tal of 36 IPOs with­in the Swedish life sci­ence sec­tor in 2017 — up over 30 per­cent from 2016 — the in­flux of new biotech and med tech com­pa­nies on the Swedish stock mar­ket is note­wor­thy. From an in­ter­na­tion­al per­spec­tive, the con­sid­er­ably big­ger US mar­ket saw 44 IPOs in the sec­tor dur­ing the same pe­ri­od, where­as the Copen­hagen stock ex­change of Den­mark trailed be­hind the Swedes with a mere two new list­ings.

Swedish news- and analy­sis firm Bio­S­tock (bio­s­tock.se) has tak­en a clos­er look at the per­for­mance of re­cent­ly list­ed Swedish com­pa­nies dur­ing their first year on the stock mar­ket. Even when ex­clud­ing ex­tremes such as the dra­mat­ic 548 per­cent spike in the share price of Pro­light Di­ag­nos­tics, a de­vel­op­er of mo­bile in­stru­ments for quick di­ag­no­sis of coro­nary throm­bo­sis, it would have paid off to have in­vest­ed in Swedish Life Sci­ence’s stock mar­ket new­bies dur­ing 2017.

Tak­ing Pro­light Di­ag­nos­tics in­to ac­count, the mean av­er­age yield was 31 per­cent. With­out it, me­di­an yield was around 16 per­cent, which al­so beat the in­dex to boot. This de­vel­op­ment cor­re­sponds well with the US IPO mar­ket last year where ac­cord­ing to an­a­lysts the me­di­an yield for the 44 re­cent­ly list­ed com­pa­nies was around +12 per­cent, ex­clud­ing Anap­tys­Bio and Ar­genx, which soared by 528 per­cent and 240 per­cent re­spec­tive­ly af­ter their ini­tial pub­lic of­fer­ings.

Long term vs. short term strat­e­gy – and the win­ner is

Dur­ing the glo­ry days of biotech in the past years, many Scan­di­na­vian in­vestors ex­ploit­ed an ex­ceed­ing­ly short-term “sub­scribe-and-sell” in­vest­ment strat­e­gy, due to the seem­ing­ly manda­to­ry in­creas­es in share price fol­low­ing a list­ing. This strat­e­gy, how­ev­er, has be­come in­creas­ing­ly risky with the enor­mous in­flux of new com­pa­nies on the mar­ket.

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There are no longer any guar­an­tees for an ini­tial spike in share price – on the con­trary, sev­er­al list­ings have been fol­lowed by dra­mat­ic drops in share price di­rect­ly af­ter the list­ing. The 2017 IPO win­ner Pro­light Di­ag­nos­tics was in fact one of last year’s biggest dis­ap­point­ments when zoom­ing in on­ly on the ini­tial pe­ri­od from its list­ing, with a 33 per­cent drop in share price from the IPO on March 31 to mid-Ju­ly.

Life Sci­ence in­vestors who ad­vo­cate a more long-term per­spec­tive could al­so point to the ex­am­ple of Eno­ra­ma Phar­ma, de­vel­op­er of med­ical chew­ing gum and inar­guably the over­all sec­tor win­ner of 2017, with a share price that had soared 864 per­cent by the end of the year. Nev­er­the­less, from its IPO in Ju­ly 2016 and a whole year on­wards its share price hov­ered around 6 SEK (slight­ly un­der the list­ing price), un­til the com­pa­ny was able to present a se­ries of good news, in­clud­ing a part­ner­ship with glob­al phar­ma gi­ant Dr Red­dy’s Lab­o­ra­to­ries re­gard­ing prod­uct de­vel­op­ment and dis­tri­b­u­tion of its pri­ma­ry prod­uct – an NRT chew­ing gum – on the North Amer­i­can mar­ket.    

No clear trend in­di­ca­tors

In Bio­S­tock’s re­view of this year’s Swedish IPO win­ners and losers, it was im­pos­si­ble to iden­ti­fy a clear trend re­gard­ing which in­di­ca­tions or de­vel­op­ment fields were more or less pop­u­lar with in­vestors. Among the best-per­form­ing new­com­ers, biotech com­pa­ny Pro­light Di­ag­nos­tics (+548 per­cent) was an ex­treme case. Sec­ond best, with a more “mod­est” +183 per­cent rise was XSpray Phar­ma, which de­vel­ops im­proved and gener­ic ver­sions of can­cer drugs al­ready in the mar­ket, us­ing its patent­ed Right­Size-tech­nol­o­gy. Third on the win­ner list was IR­LAB Ther­a­peu­tics, which de­vel­ops phar­ma­ceu­ti­cals for neu­rode­gen­er­a­tive dis­ease and de­men­tia, with a +138 per­cent in­crease in share price as per the last day of trad­ing in 2017.

Re­spec­tive­ly, there was no ob­vi­ous com­mon de­nom­i­na­tor con­cern­ing in­dus­try fo­cus among the year’s three biggest IPO losers. Chor­date Med­ical Hold­ing, which lost 74 per­cent of its trad­ing val­ue dur­ing the year, works with treat­ing rhini­tis, An­nex­in Phar­ma­ceu­ti­cals (-65 per­cent) fo­cus­es on car­dio­vas­cu­lar dis­eases and Pan­ion An­i­mal Health (-58 per­cent) is de­vel­op­ing a gene ther­a­py for the treat­ment of epilep­sy-like con­di­tions in dogs and oth­er an­i­mals.

Over­all, look­ing at all the Swedish in­dus­try new­com­ers, Bio­S­tock con­cludes that the IPO year of 2017 pro­duced as many win­ners as it did losers, with 18 com­pa­nies show­ing a share price in­crease (out of which 13 gained more than 50 per­cent) and 18 com­pa­nies drop­ping af­ter their list­ing. Out of the mis­for­tu­nate ones, five com­pa­nies had lost more than half their mar­ket val­ue by De­cem­ber 31. The chart be­low shows a sum­ma­ry of all Life Sci­ence new­com­ers on the Swedish stock mar­ket and their share price de­vel­op­ment re­spec­tive­ly dur­ing the year.

De­vel­op­ment for Life Sci­ence com­pa­nies list­ed dur­ing 2017