Here's what's behind the biotech cash grab

T-cells immune system cancer immunotherapyUniversity of Pennsylvania via Microbe World / FlickrIn this 2011 image, tiny beads (yellow) are used to force T-cells to divide before they are given to leukemia patients.

Biotech companies looking to grab some cash have hit the ground running in 2016.

In the past two days, six companies filed for initial public offerings while seven already-public companies filed to sell more shares. The follow-ons alone shape up to be about $1.1 billion, while the IPOs add up to about $500 million based on preliminary targets.

Among the companies who filed IPOs are ones looking at gene therapy, cancer immunotherapies, Hepatitis B and CRISPR.

Editas Medicine, whose CRISPR gene-editing technology has so far only been tested in animals and non-viable human embryos, has a goal to move to human trials by 2017, but there are major challenges facing its commercialization, including patent disputes and a fair amount of hype.

What’s prompting some head scratching around these filings is that they come while stock markets are so skittish. That’s usually not the optimal time to start asking investors to bet on new stocks.

“There is more of a risk being priced in the promising early stage companies,” said Andreas Argyrides, a managing partner at Asclepia Capital, a small biotech-focused hedge fund. “You’re in a period of great scepticism.”

But Argyrides thinks one reason the filings are coming out now is that things could actually get worse.

After a booming start to 2015, biotech stocks were hammered late in the year after Democratic presidential candidate Hillary Clinton tweeted about price gouging. The attention of politicians has shifted elsewhere for now so backers of early stage companies might see a window of opportunity, before this year’s election means there’s plenty of opportunity for the drug pricing debate to heat up again. 

There’s another more mundane reason for the push in January. Next week is JPMorgan’s annual healthcare conference. It’s a big event for the industry and its a chance for companies to meet potential investors or acquirers. 

There was a similar jump in filings a year ago. Approaching the end of January 2015, publicly traded biotechs reached out for $2.7 billion in cash. Back then, though, stock investors were in a better mood.

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