Biotech Starts 2024 With IPO Boom That Could Bring Wave Of Real Estate Deals

It may not feel like it in the midst of winter, but a slight thaw in biotech fundraising might signal more IPOs, deals and eventually real estate leases.

In recent weeks, high-profile IPOs from CG Oncology, Arrivent Biopharma and Kyverna have not only been successful but have seen follow-on investment and double-digit stock price growth after entering the market. Kyverna, which saw its share price rise 55.7% when it opened in early February, had a market cap of $1.4B. 

Biotech firms raised $6.2B in equity capital in January, leading the Financial Times to declare an end to the two-year funding drought.

And there are signs of more to come. Yasin Keshvargar, a capital markets partner at law firm Davis Polk, told the paper, “There's a good backlog of biotechs who didn’t go public over the past year or so who are sharpening their pencils again.” 

“We're excited about the potential signal that the Wall Street window might be cracking open a little bit,” said Matt Gardner, leader of CBRE's advisory life sciences practice in the U.S. “But it’s not a trend until it's held up for a few months.”

IPOs tend to result in real estate activity six months to a year later, Gardner said, so any activity in early 2024 likely won't impact leasing until the end of the year. But at a time when vacancy rates have risen and a significant amount of new supply is expected to hit the market in the next few quarters — 38M SF is currently under construction, per CBRE — signs of momentum would be much appreciated. More IPOs in the next few months might create a runway for future investment in new talent and lab space. 

There are numerous positive signals underlying this shift, despite the continued high cost of capital. Companies that have pursued or are expected to pursue an IPO are geographically diverse. The FDA has also rapidly sped up its approval process in recent years, which led to a near-record number of approvals last year and expectations of a similar volume and pace in 2024. CBRE found that the percentage of drug trials in Phase 1 or 2 stages, 71.4%, is the highest it has been in 20 years, indicating potential approvals and company formation. 

Stifel analysts predict that somewhere between 25 and 40 biotech IPOs might happen in 2024, a significant rally. And a few potential blockbusters, including Kallyope and Rivus, which focus on the hot anti-obesity market, are yet to come. In 2021, there were 102 life sciences IPOs, versus just 20 last year. Gardner added that at the end of 2023, the number of firms ready for IPOs hit an all-time high, but some of them have since gone bankrupt.

“We have to be guarded with that optimism,” Gardner said. “But yes, we absolutely do see optimistic signals.”