ALJA Looks to Biotech for the Next Big IPO

Toshima-Ku, Japan, March 11, 2015 (Newswire.com) - Biotech is definitely red-hot, and has been for the past eight quarters. Immuno-oncology, cancer metabolism, gene therapy, orphan diseases, NASH, autoimmune – there’s a broad range of disease settings that are capturing the excitement and imagination of investors today.

With some sky high public market valuations, the big question is whether this is “hype and smoke and mirrors,” as framed up by Andy Pollack’s New York Times piece on Sunday (“Riding High, Biotech Firms Remain Way”). In the bull camp, there are certainly some fantastic new therapeutic advances coming from newly minted public biotechs, offering early but breakthrough clinical outcomes; many of these are sporting valuations commensurate with that promise. ALJA believes there is a new era of sustainable capital markets support for high impact medical innovation – where the hype is supported by substance – ALJA believes the majority of the high-flying companies of today and their product portfolios will mature favorably into their lofty valuations.

The open IPO window has dramatically reduced the cost of capital for growing and scaling venture-backed biotechs, and has created lots of optionality for private companies thinking about their futures. Optionality is a good thing in any startup venture. Further, lots of recent news about the biggest quarter of “venture” funding ever recorded for biotech.

It’s a great time for biotech – both in the public and private markets. The exit environment is the best it’s been in years, and created significantly more investor and Limited Parnter interest in the life sciences. This is a great thing after years in the doldrums.

But the nuances in the venture market reveal some of the structural aspects of the biotech sector. We don’t create very many new venture-backed companies, even in boom times, and the steady state number of maturing biotech companies getting funded each year hasn’t budged for much of the last decade. These feel like important structural constraints to recognize.

This reality helps restrain the exuberance of the current market, and despite the very positive exit tailwinds of 2013-2014, we don’t think we are anywhere near at risk of overfunding and over-competing in the startup venture-backed biotech arena.

Although certain areas, have instantly become crowded, ALJA can see that there remain an enormous number of unmet medical needs, as well as innovative approaches to address them and are ready to give thoughtful and disciplined funding to the right companies.