Biotechs buck a sluggish IPO market, but investors should tread warily
With all of the excitement around the highly anticipated Anthropic initial public offering , it might be easy to forget that this year hasn’t always been smooth sailing for many prospective stock debuts. In September, OpenAI, Anthropic’s chief rival, ruled out a 2026 initial public offering . Data center companies Airtrunk, Firmus and SB Energy have either pulled their IPO filings or delayed their debuts , citing reasons from rising interest rates to market volatility. Smart ring maker Oura , home insurance firm Bamboo and nuclear firm Holtec International have also put plans to go public on hold, while IPO prospect Nscale has been pressured by investors to cut its valuation by at least 36%, according to a Bloomberg report . Only one sector has seemingly bucked the trend: biotechnology. Since the start of August, a total of 16 firms have gone public on U.S. markets, and 11 have been biotech companies. All told, 26 biotech companies have gone public this year in the U.S., more than double 2025’s tally and the highest annual count since 2021 . At least four more offerings are in the pipeline, suggesting the sector’s momentum could persist even as investors remain cautious elsewhere. However, a busy IPO calendar doesn’t guarantee high returns. A CNBC review of the 2020 biotech IPO class found that only 16% of companies have delivered positive returns, while 44% have plunged 90% or more. If investors had purchased an equivalent stake in each stock, they would be down more than 25% as of Friday. The contrast captures the stakes for investors weighing the current wave: biotech’s fundraising window may be open, but picking the winners remains tough. Biotech’s active year A pickup in M & A by large pharmaceutical companies and the advent of hot markets, such as GLP-1 drugs, has driven the increased activity in biotech, said Avery Marquez, director of investment strategies at Renaissance Capital. Plus, biotech has insulation from broader market headwinds as stock moves in the sector are often influenced by company-specific news like trial data or developments within a specific health indication, Marquez said. Biotech IPOs also enjoy a structural advantage: time. Lower levels of capital sought and more specialized investor interest can lead to a bookbuilding and roadshow process that launches on Monday and ends with a pricing post-close on a Thursday, a timeline not seen in other industries. Renaissance, which provides pre-IPO research and IPO-focused ETFs, expects new issues in the biotech sector to remain steady through the end of the year and into 2027. The biotech IPO class of 2020 If the IPO window stays open, history offers a sobering guide to what may come next and may inform how one goes about successfully investing in the sector. In 2020, biotech IPOs were in vogue. Abundant capital driven by low interest rates and massive market liquidity, as well as a spotlight on healthcare due to the Covid-19 pandemic, powered the boom. While 2026’s rally appears driven by factors such as advances in medical science through artificial intelligence and dealmaking, the last bull market still gives interesting insights. CNBC’s examination of the group included 75 biotech companies that went public in U.S. markets in 2020, using four sources to track them and excluding companies with prior listings in their home markets. In the cohort, 17 companies were acquired, but only four received cash offers above their respective IPO prices. Biotech companies are often bought with contingent value rights that pay out based on trial or commercial milestones, and investors may be forced to wait for years to see these payouts. The good The leader of the 2020 IPO class is Revolution Medicines . The company began trading on Feb. 13, 2020, raising about $273 million at a $17 IPO price, as a clinical-stage oncology company focused on RAS proteins. It was able to secure additional funding through its acquisition of EQRx in 2023 and received a commitment of up to $2 billion from Royalty Pharma to help commercialize its products in 2025. In August, the company received FDA approval for its drug Rasonque for pancreatic cancer. While CNBC’s calculated return as of Friday was about 1,000%, the company mostly traded below $50 a share until October 2025. RVMD YTD mountain Revolution Medicines year to date The bad Unfortunately, the competition for the bad-and-ugly slots is fierce. LeonaBio is down 97% since its IPO when accounting for the company’s reverse stock splits. Formerly known as Athira Pharmaceuticals, the stock began trading in September 2020 under the symbol ATHA. The company raised more than $200 million to help initiate phase 2 studies for a central nervous system disorder treatment. But in October 2021, Leen Kawas, its CEO and president, resigned after an investigation found she had altered images in her academic research. Then, in 2024, its main product fosgonimeton failed its phase 2/3 endpoint for Alzheimer’s disease, its third failure at the phase 2 level. In December 2025, the company announced a corporate pivot and licensed lasofoxifene to treat metastatic breast cancer. Its name was changed to LeonaBio in January . Despite this rocky path, four analysts still rate it a buy, according to LSEG. LONA YTD mountain LeonaBio year to date The ugly If Athira’s story is a slow decline, Codiak Biosciences is a collapse. The development-stage biotech was focused on pioneering exosome-based therapeutics. It went public in October 2020 at $15 a share, raising $83 million. By August 2022 , signs of strain were showing as Codiak laid off employees and paused its phase 2 programs. The death knell came in March 2023, when it filed for bankruptcy protection. Less than three years after its debut, it couldn’t meet its financial needs. Equity investors got nothing. How do investors play this? With these lessons in mind, an investor may opt to play the sector by betting on companies that provide the industry’s “picks and shovels.” These companies benefit as the industry grows, and aren’t tied to the success or failure of one specific drug. CNBC’s Harvey Stober highlighted the improving conditions for biotech in July. Through Tuesday’s close, the iShares Biotechnology ETF (IBB) is up 35% in 2026, building on a 28% gain in 2025. Stober continues to like IQVIA and Danaher . Veeva Systems , a leading provider of cloud-based software for the life sciences market, may be another attractive way to play a biotech boom. The company supports pharmaceutical, biotechnology and medical device companies through the entirety of a medical product’s lifecycle. That includes supporting clinical, regulatory and safety functions. If the biotech expansion leads to more drug companies getting funding, Veeva stands to benefit by providing the crucial plumbing that helps companies run and track their clinical trials. A recently expanded partnership with IQVIA should help expand Veeva’s reach. The company has scheduled an investor day for Nov. 5, and investors will listen for significant updates to Veeva’s AI strategy. For those who still want to wade into deep water, Renaissance said prospective biotech investors should consider the phase of a company’s lead product alongside the breadth of its pipeline. According to industry group PhRMA, it takes an average of 10-15 years and costs $2.6 billion to develop one new medicine to bring to market, meaning investors hopping in on an IPO in phase 1 should consider their time horizon. Investors should also consider a drug’s total addressable market, or the number of patients that suffer from a specific illness, and whether the treatment meets an unmet need. Experience matters as much as the science. Investors should look for management teams with a record of success developing other clinical candidates and bringing them to market, as well as whether there are established investors backing the IPO. Entering a biotech IPO is akin to buying a lottery ticket. For every Revolution Medicines, there are a multitude of Athiras and Codiaks. The biotech IPO market may be open, but its history offers little assurance that today’s new listings will reward investors. For investors drawn to the current wave, the lesson is to look beyond IPO momentum: weigh a company’s clinical stage, pipeline, target market and management experience, and be prepared for a long, uncertain path from early research to commercial success. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
