Capital Markets Monitor: Q1 2023 Update

Ropes & Gray’s Healthcare and Life Sciences Capital Markets Monitor provides insights on market trends and deal structures based on data from the public filings of more than 180 IPOs and 300 equity follow-on offerings since the start of 2020. We hope that healthcare and life sciences companies and other market participants will find this information invaluable in achieving their capital-raising objectives.

Read our full 2023 report, covering IPOs and equity follow-on offerings priced from 2020 to 2022.

Quarterly Update | Q1 2023

Data analyzed from the first quarter of 2023 showed that equity capital markets activity for life sciences companies during the period was relatively light. Market activity levels closely tracked what was experienced in 2022, in terms of deal count and aggregate gross proceeds raised, as compared to the red-hot markets of 2020 and 2021. Data also showed that earlier stage life sciences companies continued to be generally absent from the follow-on markets in Q1 2023 as compared to companies with lead product candidates that were either commercialized, approved or in the later stages of clinical development. Charts and analysis covering the quarter are below.

Overview of Life Sciences IPO Market Activity

In the first quarter of 2023, there were only two life sciences IPOs, as compared to five IPOs in the first quarter of 2022 and 26 IPOs in the first quarter of 2021.

These two life sciences IPOs raised aggregate gross proceeds of approximately $353 million, down almost 50% from the prior year period.

Average Deal Size

The two life sciences IPOs that priced in the first quarter of 2023 had an average deal size of $176.6 million. As compared to full year 2022, the average deal size increased by approximately 23%.

 

Post-Deal Valuation

In the first quarter of 2023, the average deal post-deal valuation was approximately $587 million. As compared to full year 2022, the average post-deal valuation decreased by approximately 10%.

 

Stage of Clinical Development

In the first quarter of 2023, one life sciences issuer that priced an IPO had a lead product candidate in Phase 2 clinical development and the other had a lead product candidate in Phase 1 clinical development.

 

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Overview of Follow-On Offering Market Activity

In the first quarter of 2023, there were 25 life sciences follow-on offerings as compared to 12 in the first quarter of 2022.

These 25 life sciences follow-on offerings raised aggregate gross proceeds of approximately $4.0 billion, up approximately $1.7 billion from the first quarter of 2022.

  

Types of Securities Offered

In the first quarter of 2023, 84% of life sciences follow-on offerings included common stock only.

The other 16% of life sciences follow-on offerings included common stock and warrants. In each of these deals, however, the warrants were prefunded warrants, which often serve as a substitute for additional common stock.

 

Stage of Clinical Development

In the first quarter of 2023, life sciences issuers with an approved or commercialized lead product candidate were most likely to conduct a follow-on offering. As compared to prior years, the first quarter of 2023 saw a significant shift toward issuers with a lead product candidate either approved or in the later stages of clinical development. There were no follow-on offerings by preclinical stage issuers and few follow-on offerings by issuers with a lead product candidate in Phase 1.

 

Lock-Ups

In the first quarter of 2023, the most common company lock-up period for life sciences follow-on offerings was 60 days, but approximately one-third of offerings had a different lock-up period.

There was more variety among lock-up periods for directors and officers in connection with life sciences follow-on offerings, with a 60-day lock-up period being the most common.

In almost 25% of life sciences follow-on offerings in the first quarter of 2023, the company lock-up period was different than the director and officer lock-up period.

For a complete explanation of the analytical methodology used to develop the charts in this update, as well as data and analyses on over 180 IPOs and 300 equity follow-on offerings that priced between 2020–2022, please see the full Healthcare and Life Sciences Capital Markets Monitor 2023 Report.

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