Last week was a busy week for healthcare investors and investment bankers. Three biotech companies raised roughly $320 million and commenced trading on the Nasdaq despite recent negative sentiment in the sector. However, ADC Therapeutics, carrying a $1.8 billion valuation and the largest planned IPO for the week, pulled the plug, citing market conditions.

Vials and pipette

Source: Louis Reed

Three biotechs raise nearly $320 million

Viela Bio (VIE) raised the most with $150 million in its IPO through the issue of 7.9 million shares at $19 each. Frequency Therapeutics (FREQ 7.20%) and Aprea Therapeutics (APRE) managed to raise $84 million and $85 million, respectively. The valuations were not quite as similar. At pricing, Frequency's was $426 million compared to $300 million for Aprea. Investors placed a value of $944 million on Viela, more than the other two combined.

Viela Bio develops drug candidates designed to turn off the underlying causes of autoimmune diseases, a situation where the body’s immune response attacks healthy cells and tissues. Frequency focuses on small molecule drugs that stimulate the regrowth of healthy cells to combat degenerative diseases, such as hearing loss and multiple sclerosis. Aprea is undertaking multiple clinical trials with its anti-cancer drug APR-246. The drug targets mutated forms of the tumor suppressor gene p53, which according to the company is the most frequently mutated gene in human cancers occurring in more than half of all tumors.

Most everyday investors do not get the opportunity to participate in the IPO itself. They are left to buy the stocks after trading has begun. If you submit a market order prior to the start of trading, you may be able to get shares at the opening price.

Were these biotech IPOs good for investors?

Viela, Frequency, and Aprea provide us with a win, lose and draw situation. Viela opened at $21.50, 13% above the IPO price. Conversely, Frequency started trading at $11.20, a 20% haircut from the $14 IPO price. Aprea was basically flat. The opening trade crossed at $15.46, 3% above the financing price.

If you purchased shares at the opening of trading, your portfolio would be up. Viela, Frequency, and Aprea returned 8%, 20%, and 23%, respectively, last week. However, if you had participated in the IPOs, the returns would 22%, negative 4%, and 27% for Viela, Frequency, and Aprea, respectively.

Be cautious with these data as it only includes one and a half days of trading. However, the idea that buying on the open market immediately following an IPO may be a good investment in certain cases.

Two more biotech IPOs on deck for October

Are you eager to try this out? This week, two more biotechs are scheduled to go public. German biotech BioNTech has filed to list on the Nasdaq and raise $250 million at a valuation of approximately $4.5 billion. Vir Biotechnologies, a company developing drugs for infectious diseases, aims to raise $150 million giving it a value of $2.3 billion. We will have to wait to see if investor demand remains or if market conditions will derail the IPOs of these biotech unicorns.