Wall St. Loves Biotech, Leading Venture-Backed IPOs in Q2

7/1/13Follow @curtwoodward

[Updated 6:15 pm. NVCA now says historical IPO data in its report was misstated and will be revised later. This version removes earlier references to historical deal trends.]

We knew that biotech companies were lighting up the stock market this year. Today, the National Venture Capital Association has fresh numbers illustrating Wall Street’s love affair with life sciences entrepreneurs—and the corresponding cold shower awaiting their counterparts in the tech sector.

The new report, comparing venture-backed IPOs with merger-and-acquisition deals, shows life sciences companies accounting for 13 of the 21 public stock listings in the second quarter.

Information technology companies, meanwhile, turned to private buyers. The IT sector generated 69 M&A deals in the quarter, versus just 10 in life sciences, the report found.

NVCA officials didn’t offer an explanation for this divergence, and it may not be possible to come up with a clean idea of why the “IPO window” is open for one type of company over another.

But the lackluster performance of Facebook (NASDAQ: FB) since its IPO last year, coupled with big crashes for onetime darlings Groupon (NSADAQ: GRPN) and Zynga (NASDAQ: ZNGA), has to play a role in dampening everyday investors’ appetites for broader tech offerings.

That said, investors were actually spending roughly equal amounts of money on both tech and life sciences stocks. Each sector accounted for slightly more than $1 billion in IPO value during the quarter, with the largest single listing coming from Seattle-based Tableau Software (NYSE: DATA), a seller of data-visualization software.

All told, this year’s 21 second-quarter IPO deals brought in about $2.2 billion in new cash for operations.

For its part, the NVCA had an optimistic take on the trend. “We have been predicting an IPO pickup in the second half of 2013 and it appears as if this momentum has begun, driven by the strong biotechnology offerings,” NVCA president Mark Heesen said in a news release.

The M&A market, meanwhile, saw 83 deals and $2.4 billion in announced value. There is a pretty big caveat, however, with those dollar figures: they only count acquisitions with “disclosed values,” meaning the real value of M&A activity could be much higher.

But Heesen said the M&A market could be ready to grow: “Our market intelligence is telling us that there is a great deal of inbound interest for venture-backed targets, suggesting that these companies are holding out for better pricing from strategic buyers.”

Curt Woodward is a senior editor for Xconomy based in Boston. Email: cwoodward@xconomy.com Follow @curtwoodward

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