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Why biotech IPOs are suddenly hot

Jayson Punwani | E+ | Images

Biotech is hot, hot, hot!

Biotech IPOs, after doing nothing for years, are suddenly hot. One came roaring out of the starting gate today and several are pricing tonight.

Take Agios Pharmaceuticals (AGIO), which specializes in cancer treatments. Priced their IPO last night at $18, well above the price talk of $14-$16...opened at $29....closed at $31.38, up 73 percent.

Huh? And that's just the start of a biotech IPO flood that is coming. Three are scheduled to price tonight:

  1. Conatus Pharmaceuticals (CNAT) has treatments for liver disease;
  2. Onconova Therapeutics (ONTX) specializes in cancer treatments…targeted anti-cancer agents designed to work against specific cellular pathways that promote cancer;
  3. Cellular Dynamics International (ICEL) manufactures human cells for drug discovery and screening, to test the safety and efficacy of drug candidates, and for stem cell banking...insiders are buying $10 million.


What's going on? Here's why:

  1. Biotech is hot. Since bottoming in 2009, the Biotech Index (BTK) is up almost 300 percent, outperforming the S&P 500, which is up 150 percent;
  2. Certain sub-sectors of biotech, like cancer (oncology) is a hot space to be in right now;
  3. While many biotech stocks have never done well in the IPO space, that has changed recently. There is a window that has opened. One difference: many of these new companies have sponsorship with bigger pharmaceutical companies.


Take Agios, which went public today. Celgene bought $7 million in the initial public offering, I am told by traders.

Or take Onconova, pricing tonight. Insiders (board members) as well as collaborator Baxter Healthcare, will buy $26 million in stock in the IPO.

So is "biotech" the new "cloud computing" (last year's magic word for IPOs)? Stay tuned.


By CNBC's Bob Pisani

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  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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