Biotech IPOs: A Tale of Two Continents

Biotech IPOs: A Tale of Two Continents

Not long ago, biotech firms queued eagerly for public markets, buoyed by cheap money and boundless optimism. The IPO window, however, slammed shut in 2022 under pressure from rising interest rates, stubborn inflation, and skeptical investors. Since then, biotech companies on both sides of the Atlantic have found themselves navigating a distinctly harsher climate.

The American Resilience

Across the Atlantic, the U.S. biotech IPO market is showing tentative signs of revival. Early 2024 saw notable deals, such as California-based CG Oncology, which raised $437 million, signaling renewed investor appetite for companies with promising late-stage therapies. By May 2025, momentum had cautiously grown. Apimeds Pharmaceuticals managed to raise a modest $13.5 million through its IPO, touting innovative osteoarthritis treatments derived from purified bee venom. Odyssey Therapeutics and Sionna Therapeutics are also among the recent candidates who have filed, aiming to brave the turbulent IPO waters in hopes of capturing investor interest (xtalks.com, fiercebiotech.com).

Yet optimism remains cautious rather than exuberant. Investors, still nursing wounds from the speculative frenzy of 2021, now prefer late-stage, clinically validated companies with clearer paths to profitability. The era of generous valuations based on blue-sky potential appears decisively over.

Europe’s Persistent Chill

Europe, by contrast, remains notably quiet. Despite the brief surge of excitement around Galderma’s IPO in March 2024, where the Swiss dermatology giant raised an impressive CHF 2 billion, enthusiasm quickly cooled (reuters.com). Galderma's successful listing offered a fleeting glimpse of what might be possible in Europe's fragmented markets, yet few have managed to follow in its footsteps.

European biotech firms continue to grapple with structural issues such as fragmented exchanges, limited specialist investors, and conservative market cultures. These factors collectively discourage ambitious firms from listing locally, pushing them instead toward Nasdaq, where deeper liquidity and investor expertise promise richer rewards. This ongoing exodus poses existential questions for Europe's biotech ecosystem, which risks losing its most promising ventures to American shores.

M&A: Europe's Alternative Exit?

Amid the IPO drought, mergers and acquisitions have increasingly provided European biotech firms with an exit route. Cash-rich pharmaceutical giants, eager to bolster their pipelines, have snapped up smaller biotechs, offering immediate liquidity and premium valuations that public markets often struggle to match. While beneficial in the short term, Europe's growing reliance on M&A exits could inadvertently stifle the development of a robust local public market, further entrenching the continent’s disadvantage relative to the U.S.

Macroeconomic Winds of Change

Hope may lie in the broader macroeconomic backdrop. Central banks have signaled an end to aggressive rate hikes, with potential cuts on the horizon through 2025. Lower rates typically bolster investor appetite for riskier assets such as biotech, potentially re-energizing the IPO market. Yet investors remain selective, gravitating toward companies with clear clinical milestones and demonstrable near-term profitability rather than speculative early-stage bets.

Outlook: Selective Revival Ahead

Looking forward, cautious optimism is warranted. IPO pipelines in both regions are gradually refilling with credible candidates, suggesting a selective but meaningful recovery. However, Europe's path remains fraught, contingent upon structural market reforms and deeper investor pools to foster sustainable IPO conditions. Without these changes, Europe's biotech talent will likely continue its journey westward, drawn inexorably toward Nasdaq’s more fertile grounds.

In short, the IPO window has begun inching open again—but selectively, and with lingering questions about Europe's ability to hold its own.