Kelly Slone

by & filed under Exits, Issues, Medical Innovation, NVCA Blog, Research.

As the flood of 2013 recaps and 2014 predictions begins to recede, one storyline continues to spur optimism among venture capitalists: the continued improvement in the venture-backed IPO market. In no sector was this trend more notable than in biotechnology.  With 42 IPOs, biotech provided nearly half of the venture-backed total in 2013. In fact, 2013 saw more biotech IPOs than the last five years combined.

Many factors impact the exit environment for venture-backed companies in a given year. But we believe that two NVCA policy initiatives in 2012 helped pave the way for biotech’s resurgence in 2013. The first is the JOBS Act of 2012, which aimed to ease the cost and regulatory burdens faced by small, innovative startups looking to go public. This past year, the average biotech IPO raised $83 million, which is exactly the type of offering that the JOBS Act’s On-Ramp was designed to enable.

The second is the FDA Reform Act of 2012. NVCA and MedIC members worked tirelessly in support of that legislation because we believed that a demonstrable commitment to reform on the part of Congress and the FDA would help improve confidence and outlooks for participants across the entire life sciences continuum. For example, we believe that the upward trend in drug approvals over the past several years has increased investor confidence in the FDA’s review and approval process.  We also believe that stronger fundamentals have attracted generalist investors back to the sector, which has increased both the available pool of capital and IPO company valuations.

All of these factors drove IPO market performance in 2013. And we are cautiously optimistic that their momentum will carry over into 2014.