Comparing long-term value creation after biotech and non-biotech IPOs, 1997–2016

Authors

Ekaterina Galkina Cleary
Laura M. McNamee
Skyler de Boer
Jeremy Holden
Liam Fitzgerald
Fred D. Ledley

Document Type

Article

Publication Date

1-6-2021

Publication Title

PLoS ONE

First Page

1

Last Page

13

DOI

https://doi.org/10.1371/journal.pone.0243813

Abstract

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.

Recommended Citation

Cleary, Ekaterina Galkina; McNamee, Laura M.; de Boer, Skyler; Holden, Jeremy; Fitzgerald, Liam; and Ledley, Fred D., 2021. Comparing long-term value creation after biotech and non-biotech IPOs, 1997–2016, PLoS ONE.