Open AccessComparing long-term value creation after biotech and non-biotech IPOs, 1997–2016
Author(s) -
Ekaterina Galkina Cleary,
Laura M. McNamee,
Skyler de Boer,
Jeremy P. Holden,
Liam Fitzgerald,
Fred D. Ledley
Publication year - 2021
Publication title -
plos one
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.99
H-Index - 332
ISSN - 1932-6203
DOI - 10.1371/journal.pone.0243813
Subject(s) - initial public offering , business , revenue , shareholder , value (mathematics) , microbiology and biotechnology , listing (finance) , finance , biology , corporate governance , machine learning , computer science
We compared the financial performance of 319 BIOTECH companies focused on developing therapeutics with IPOs from 1997–2016, to that of paired, non-biotech CONTROL companies with concurrent IPO dates. BIOTECH companies had a distinctly different financial structure with high R&D expense, little revenue, and negative profits (losses), but a similar duration of listing on public markets and frequency of acquisitions. Through 2016, BIOTECH and CONTROL companies had equivalent growth in market cap and shareholder value (>$100 billion), but BIOTECH companies had lower net value creation ($93 billion vs $411 billion). Both cohorts exhibited a high-risk/high reward pattern of return, with the majority losing value, but many achieving growth multiples. While investments in biotechnology are often considered to be distinctively risky, we conclude that value creation by biotech companies after IPO resembles that of non-biotech companies at a similar stage and does not present a disproportionate investment risk.