The life sciences sector will likely be one of the major drivers in what some analysts predict as the beginning of the largest economic expansion in recent history. Fenwick’s 2021 survey of 366 tech and life sciences executives and investors points to a post-pandemic IPO boom fueled in part by innovation related to the success of COVID-19 vaccine development.
Startups working in technology and life sciences went public in record numbers during the second half of 2020 with a spate of traditional IPOs, direct listings and special-purpose acquisition companies (SPACs). This rush of activity is expected to continue at least through this year, according to our survey.
Behind the Boom
Nearly all executives and investors surveyed agree we’re in the early days of a boom period, and that the steady stream of market debuts will continue. Life sciences respondents also foresee companies in their space choosing a merger with a SPAC over traditional IPOs—especially as higher-quality sponsors and institutional investors continue to launch SPACS.
Offerings in the life sciences space could gain additional momentum from the success in developing COVID-19 vaccines. The largest life sciences IPO of 2020 was a $1.6 billion offering from private-equity backed Maravai LifeSciences, which produces biopharmaceutical products that are critical to vaccines—including Pfizer’s COVID-19 vaccine. Along with a steady stream of scientific breakthroughs in other categories, Maravai’s rising tide could lift many vessels—even those of companies with no connection to inoculations.
Bankers tell us they are bullish all the way through the year, believing the market will accelerate as vaccine distribution picks up speed.
Perhaps not surprisingly, the survey revealed differing mindsets between life sciences professionals and those from the wider technology community when it comes to how startups will go public.
The Prevalence of SPACs
Historically low interest rates, the high quality of institutional investors and other factors are driving the popularity of SPACs. However, life sciences executives and investors are spending a lot less time thinking about these special-purpose vehicles than their counterparts in technology.
About two thirds of life sciences executives and investors say the SPAC boom will last through 2021, compared to 85% of those in technology. Just 25% of life sciences respondents say they believe there is a SPAC bubble, compared to 70% of tech investors and 72% of tech executives.
It could be that these life sciences investors and executives are less concerned about SPACs because of the large number of promising life sciences companies lining up to take the traditional IPO route this year.
Learn more about what tech and life sciences leaders told us they believe is fueling the SPAC boom and what the future holds for key IPO terms such as lock-ups and dual class structures: “IPO Landscape: Surging SPACs and a Pandemic Boom Ahead.”
Originally published March 25, 2021, on Fenwick's Life Sciences Legal Insights blog.