With a fast and furious finish, yesterday, March 2nd, the Nasdaq Composite (IXIC) closed at 5,008.10, marking the third day in history with a close above 5,000. Since 95% of US publicly traded biotech companies are listed on the Nasdaq exchange, the team at BIO couldn’t help but join the excitement.
Back in 2000, the Nasdaq index was flourishing with dot coms. At that point there was no Facebook or Netflix and Google wasn’t public. The decline of the Nasdaq Composite began shortly after the high and within a year it had declined by half.
Fifteen years and a whole lot of industry changes later, the Nasdaq Composite hit 5,000 again. According to a recent Forbes piece, the fourth biggest gainer of the Nasdaq 100 was Gilead Sciences, with Celgene, Regeneron Pharmaceuticals and Biogen Idec not far behind in the top twenty.
Last month, Nelson Griggs, Executive Vice President of Listings Services at Nasdaq participated in a closing plenary at the BIO CEO & Investor Conference, What’s Liquidity Got To Do With It?”-2015 Market Outlook. During the session, Griggs provided a background on the market, with a strong focus on the IPOs in general with biotech being one of the highest performing sectors of the IPO class of 2014. According to Griggs’ data, by 2014 year end, the average return was 44% for biotech IPOs, with healthcare not far behind at 35%.
According to Griggs, in an interview with BIO’s Director of Industry Research and Policy Analysis, David Thomas, Nasdaq has over 300 biotech listings and about a third of those listings were companies that completed their IPO between 2013 and the present. Griggs attributes Nasdaq’s success in capturing the market to several factors including a newly created Advisory Team comprised of 80 biotech company executives, indicating Nasdaq’s commitment to the sector. At the date of the interview, February 10, 2015, four biotech companies had already gone public on the Nasdaq exchange. Additionally, 60 deals in total (including private placements and follow-ons) were completed in January alone, raising over $ 10B. While these numbers may seem all but impossible to sustain, Griggs refers to buoyant M&A market to provide general sector support.
Grigg’s concludes by saying that reward does not come without risk. He states that two potential risk areas are payer pressures affecting pricing and revenue in the specialty pharma sector as well as developments around the Affordable Care Act following the November mid-term elections. He cites the FDA’s approval of 41 new drugs in 2014 (largest number in more than a decade) and the increased volatility in Oil & Gas industries and the Foreign Exchange Market as key market drivers for biotech.
Growth of the biotech sector and the market in general is no surprise, but celebrating new highs is far more enjoyable than lamenting the lows.