Proskauer IPO Database
2016: 22 IPOs (33% of 2016)
2015: 33 IPOs (37% of 2015)
2014: 37 IPOs (31% of 2014)
2013: 31 IPOs (31% of 2013)
Total: 123 Health Care IPOs

Health care was the leading sector by deal count for the fourth year in a row. Of health care IPOs priced in 2016, 19 (86%) were by biotech or biopharm companies, two (9%) were by medical devices or diagnostics companies and one (5%) was by a hospital / clinic. Since 2013, our study has examined a total of 123 health care IPOs.

High Insider Participation – More than 80% of health care issuers disclosed insiders purchasing in the IPO, compared to 22% for all other IPOs. On average, purchases by these insiders comprised 39% of the gross proceeds of health care IPOs, compared to 25% of the gross proceeds across all other sectors. This insider purchasing activity has increased from already high numbers last year when we identified that 64% of health care issuers disclosed insider purchasing in the IPO, comprising an average of 26% of gross proceeds. Unlike last year, however, health care issuers with insiders purchasing did not perform as well in the aftermarket as IPOs without insiders purchasing overall.

Significant Capital Raising Activity Prior to IPO – Nine of 22 health care issuers (41%) issued equity securities in private placements in the twelve months leading up to their IPOs. 89% of these issuers did so in the six months leading up to their IPOs. Because many biotech/biopharm issuers are pre-revenue, they are often engaged in more frequent capital raising activities compared to issuers in other sectors.

Fewer SEC Comments, but Longer Time to Pricing – Health care IPOs received fewer SEC comments, on average, than other sectors. In addition, health care IPOs received fewer SEC comments in 2016 as compared to 2015. 86% of issuers in 2016 received a cheap stock comment, up from 73% of issuers in 2015.

Health care IPOs received fewer comments than other sectors on other topics like revenue recognition and segment reporting. Despite a decrease in SEC comments, as was the case with many sectors, the time from initial submission or filing almost doubled year over year. This year the average number of days from initial submission or filing to pricing was 213 days, as compared to 129 days in 2015.

Taking Full Advantage of EGC Status – In 2016, 95% of health care issuers were EGCs, as compared to 69% of issuers for all other 2016 IPOs and 100% of all health care IPOs in 2015. Health care issuers, more than any sector, took advantage of certain JOBS Act exemptions.

  • Limited Financial Information – 88% of the health care EGC IPOs in our study included two years of audited financial statements compared to 65% for all other EGCs in our overall study, and 88% included two years of selected financial statements, compared to 42% for all other EGCs in our study. Biotech/biopharm issuers were even more likely to disclose only two years of financial statements, with 93% including two years of audited financial statements and 93% including two years of selected financial statements. In addition, three issuers in this sector completed IPOs with less than two years of financial statements given a limited operating history.
  • Testing-the-Waters – Eight of 21 health care EGC issuers (38%) reported to the SEC that they engaged in testing-the-waters communications, compared to 13% for all other EGC issuers. Of these eight health care issuers, seven were biotech/biopharm issuers. Since many biotech/biopharm issuers are pre-revenue, these issuers often benefit from feedback from potential investors prior to marketing their transactions.

High Percentage of Director Independence – 90% of health care issuers had a majority of independent directors on their boards compared to 63% for all other IPOs. This may be related to the low percentage of controlled companies in the health care sector as compared to other sectors. Health care issuers with majority independent boards, on average, had 77% of their board composed of independent directors.

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