HSFC_2017_01_11

C2|Wednesday,January 11, 2017|SFChronicle.com XXXXX

BUSINESS

Last quarterwas the
slowest three-month
period for drug compa-
ny initial public offering
in fouryears, according
to Bloomberg data. And
in 2016, only 36 biotech
and pharmaceutical
companieswent public
in theU.S., compared
with 68 in 2015 and a
record85 in 2014.
The long drought
comes ahead of the
health care industry’s
biggest gathering of
companies and inves-
tors, theJ.P. Morgan
Healthcare Conference
in SanFrancisco,which
beganMonday. The
week before the massive
conference typically
serves as a launchpad
for fresh offerings.This
year? Nothing.
“Biotech had a diffi-
cult year generally from
a performance perspec-
tive, and so a bunch of
the generalists have
exited the market and
money’s becomemuch
tighter,” said Bryan
Roberts, a partnerat
Venrock, a technology
and health careventure
capital firm withabout
l3.1 billion under man-
agement. “When peo-
ple’s comfort with risk
goes down, IPOs are
one of the first things to
fall off the edge of the
cliff.”
There are several
reasonsat play. The

market has been in a

slump: The Nasdaq

BiotechnologyInde x of

164 companieswas

down 22 percent in

2016, the firstyearlong

losingstreak since 2008

and theworst year since

2002. And with a new
      president taking office
      and promising to cut
      taxes andoverhaul the
      health caresystem,
      bankers and investors
      may bechoosing towait
      and see.
      “I think in the 2014 to
      2015 periodwe were a
      bit spoiled as an in-
      dustry,” said David Sa-
      bow, a managing direc-
      tor at SiliconValley
      Bank.“After two consec-
      utive years of avery
      liquid market, we
      thought that may be the
      new normal, but 2016
      showed us thatwas not
      the case.”
      Only l444.1 million
      was raised inU.S.-l isted
      biotechnology and phar-
      maceutical IPOsduring
      the fourthquarter of
      2016 and seven compa-
      nies went public,ac-
      cording toBloomberg
      data.
      In 2016, seven U.S.
      biotechnology and drug
      companies announced
      their intent togo public
      in the first eight days of
      the year. Not a single
      one has raised their
      hand sofar thisJanu-
      ary. Bruce Booth, a
      partnerat investment
      firm Atlas Venture, said
      he’s not worriedabout
      that holdup.

“If the‘new normal’

is a steady flow of 25-

plus biotech IPOs each

year, thatwould be a

sign of avery healthy,

maturing sector,” Booth

said. “Weshouldstart

to see a few IPOsby

the end ofJanuary or

early February. I’d antic-

ipate four to five of

themby the end ofFeb-

ruary.” Booth’s fund,

which manages around

l700 million, has in-

vestments ingene-ed-

iting firmIntelliaThera-

peuticsInc. and cancer

drugmakerUnum Ther-

apeuticsInc.

There could also be a

pickup thanks to the

broader stock market

surg e that has followed

President-elect Donald

Trump’s election victory.

The Standard IPoor’s

500 Inde x is up 6.4

percent since theNov. 8

election day.

“CEO confidence is a

criticalfactor in driving

MIA,” said Richard

Landgarten, Barclays

PLC’s head of health

care and real estate

banking. “Right now

they feelgood about the

stock market broadly

and, for example, the

potential for pro-busi-

ness tax reform from

the newadministration.”

Several biotech names

have beenfloated for

2017 IPOs, including

JounceTherapeutics and

BraeburnPharmaceu-

ticals,which have an-

nounced their intention

to go public in the com-

ing year without giving

an exact date.

IPOs could also be

prodded if takeovers

increase in the industry.

Big drugmakers have

been sitting on cash left

overseas,waiting on

potential tax reform

fromTrump andRe-

publicans in Congress.

They’ve promised to

lower rates,which could

help repatriate l98 bil-

lion ofoverseas cash

among large pharmaceu-

tical companies,accord-

ing toJefferies analyst

JeffreyHolford.

Johnson IJohnson

has about l40 billion

overseas, followed by

Merck I Co. withabout

l20 billion, then Pfizer

with nearly l15 billion,

accordingHolford’s Nov.

9 note toclients. Some

of that money willstay

invested abroad, and the

rest could be brought

back for potentialacqu i-

sitions.

“The smartest money

in this space iswatching

the first 100 days” of the

Trumpadministration,

said Sabow.

AndyWeisenfeld, a

partnerat health care

investment banking firm

MTSHealth Partners

LP, said he expects 2017

to be similar to 2016,

with drugmakers letting

smaller biotechs take

the risks of research

and development, then

stepping in to snapup

experimental products

once they’ve proved

themselves.

“Prices for the better

targets might go up, but

if something hasn’t been

de-risked, I think for

the most part these

companieswould rather

pay more and have it

de-risked than pay real

money and have it fail,”

Weisenfeld said.

Caroline Chen, Alex

Barinka andKatherine

Greif eld are Bloomberg

writers. Email: cchen509@

bloomberg .net,

abar inka2@bloomberg .net,

kgreifeld@bloomberg .net

S.OTLIGT ON BIOTECMarket Data Provided by Bloomberg News

Biotech IPOs

hit drought

as in vestors

await Trump

Biotech exchange-traded funds

ETF Close 1WkChg

Valueof $1000investedover: 1month3months

$900 $1000 $1100

BiotechHoldrsTrust 116.23 5.78%

First Trust NYSE 98.29 6.74%

PowerShares Dynamic 42.02 6.73%

SPDR S&P Biotech 65.75 10.34%

10 biggest movers among companies in the Nasdaq Biotech Index

Nasdaq Biotech gainers&losers

Company Close 1WkChg

Value of $1000 invested over: 1month 3months

$100 $1000 $1900

AriadPharma 23.68 91.43%

SareptaTherpt 37.89 35.71%

PTC Therapeutics 14.93 32.95%

Halozyme 12.89 29.03%

Exelixis Inc 18.91 28.38%

Endo Intl 15.31 –12.36%

MerrimackPharma 3.40 –15.00%

EaglePharma 66.35 –17.18%

NanoStringTech 17.99 –18.52%

AMAG Pharma 23.10 –31.96%

Company Close 1WkChg

Companiesin the BayArea biotechIndex

Bay Area biotech

Valueof $1000investedover: 1month3months

$500 $1000 $1500

BioMarin Pharma 90.40 5.31%

Bio-Rad Labs 188.48 3.05%

Exelixis Inc 18.91 28.38%

FibroGenInc 23.90 12.21%

FivePrimeTherpt 51.78 6.54%

GenomicHealth 29.70 0.85%

Geron Corp 2.20 3.29%

Gilead Sciences 75.01 1.15%

Nektar Therpt 13.51 6.46%

Pac Biosci of CA 5.01 14.91%

UltragenyxPharma 73.85 5.55%

VarianMedSys 89.99 –0.76%

Exelixis PacBiscfCA U.S.funds

Selectcompaniesvs. acompositeof biotechfundsdomiciledin the U.S.

Biotechoverview

2016

330

220

110

0

–110

%

Bay Areabiotech NasdaqBiotech

Biotech stocks

7

0

–7

–14

–21

2016

%

By Caroline Chen,
Alex Barinka and
Kath erine Greifeld

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ILBERTBy Scott Adams

time-consumingtoget

informationinorout,and

onlypeoplewithspecial-

izedskillscanusethem.

Butthenewcloud-

basedtechnology, using

Internet-erasoftware,is

flexibleandinteractive.It

opensthedoortothe

monitoringofemerging

diseaseclust ers,billing

patternsandprogram

effects.Forexample,did

thepercentage oflow

birth-weight babiesde-

clineafteraMedicaid

programwasputin

place?If so,howmuch?

“Thiskindofdatacan

Thisweek,forthefirst
time,Nuna’sexecutives
aretalkingaboutthe
company’sfunders,busi-
nessstrategyandwork
forMedicaidat theJ.P.
MorganHealthcareCon-
ferenceinSanFrancisco.
Healthdataonitsown
—billing,diagnosticand
treatmentinformation,
typicallyrecordedin
arcane,shorthandcodes
—isnotveryuseful.Butif
it canbeaggregatedand
analyzedeconomically
andquickl y, thatdatais
seenasavitalingredient
intransforminghealth
care.
Thehealthcaremar-
ketplaceinthetraditional
fee-for-servicemodel
valu esvolume. More
doctorvisits,hospital
stays,operationsandpills
meanmorerevenueand
profitforhealthcare
providers.Butthepushin
recentyearshasbeen
towardwhatisknownas
valu e-basedhealthcare.
In thevalu emodel,medi-
calgroupsarepaidfor
outcomes:patientstreat-
edmoreefficientlyand
peoplewhoarehealthier.

Butthattransition

becomespossibleonly

with accurate,reliable

dataastherawmaterial

formeasuringoutcomes

anddiscoveringwhat

worksandwhatdoesnot.

That isthereasonforthe

excitementaboutand

investmentinhealth

informationtechnology,

andthegoaloftheMedic-

aidwork with Nuna.The

datawillbestrippedof

identifyinginformation

beforeit isreleasedto

researchers.

Kim,35,aformerGoo-

gleproductmanager, has

firsthandexperiencewith

Medicaid.Herbrother,

Kimong,whoisa year

younger,isseverely autis-

tic. Whenhewas8,Ki-

mongstartedhaving

monthlygrandmalsei-

zures,whicharecharac-

terizedby lossofcon-

sciousnessandviolent

musclecontractions.The

ambulance,hospital,

doctorandtherapybills

piledup.As a9- year-old,

KimhelpedherKorean

immigrantparentscom-

pletetheMedicaidappli-

cationforms.

“Ourfamily would

have gonebankruptwith-

outMedicaid,”shesaid.

“Itsa vedus.”

TheMedicaidsystem

coversmillionsofwork-

ingfamilies,olderpeople,

childrenandpeoplewith

disabilities.In fact,40

percentofMedicaid

spendinggoestothe

peoplewithdisabilities.

Halfoflong-termcarein

theUnitedStates,mainly

forolderpeople,is

throughMedicaid.And

nearly halfthechildren

bornintheU.S. areinthe

Medicaidsystem.

Thetroublewithtradi-

tionalhealthdataware-

houses,specialistssay, is

thattheyresembledigital

vaults.It isdifficultand

helpmove healthcare

policyfromapartisan

ideologicaldebatetoone

informedby knowing

whothepeopleaffected

areandwhatwilllikely

happentoMedicaidre-

cipients,”saidDrewAlt-

man,presidentofthe

Henry J. KaiserFamily

Foundation,anonprofit

healthpolicyresearch

organizationinMenlo

Park.

Thoughyoung,Kim

hasspentyearslearning

hard-earnedlessons

abouthealthcare.At

Google,shewasaproduct

manageronGoogle

Health,afailedeffortto

attractmillionsofpeople

touseitsfree,online

personalhealthrecords.

“Healthcareishard,

andhumilityisimpor-

tant,”Kimsaid.“You

can’t justputtechnology

onsomethingandassume

it’s goingtowork.You

reallyhave tounderstand

theecosysteminhealth

care.”

In late2013,Kimgota

callfromWashingtonand

becameoneofthesmall

cadreofSiliconValley

technologyspecialists

calledontofixHealth-

Care.gov,the application

websiteforhealthinsur-

anceundertheAfford-

ableCareAct.That was

sixmonthsof18-hour

days,se venda ys aweek

throughThanksgiving,

Christmas,NewYear’s

andbeyond,untiltheend

ofthespring2014enroll-

mentperiod.

Nuna,foundedin2010,

hadonlyonefull-time

employee, Kim,until

2014,whenit go tanearly

roundofventurefinanc-

ing.Andnoonewaspaid

untilthen.DavidChen,

thecompany’sco-founder

andchiefdataofficer,

holdsadoctorateinbioin-

formaticsfromStanford

University,buthealso

wasadatascientistat

Netflixforthreeyears

whileNunawasgetting

offtheground.

Today, Nunahas110

employees.It hasraised

l90millioninventure

capitalledby Kleiner

Perk insCaufieldIByers

andprominentindividual

investors,includingJohn

Doerr,Kleiner’s chair-

man,andJoiIto, director

oftheMITMediaLab.

SteveLohrisaNewYork

Timeswriter.

S.F. startupgathers Medicaid data in cloud

Nuna from page C1

Jason Henry / NewYorkTimes

Jini Kim helps herautistic brother Kimong with hislunch at the Nuna

headquarters in SanFrancisco.His care isshared among family members.