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Royalty Pharma IPO pushes funds raised in healthcare debuts past $10B in Q2

Royalty Pharma PLC 's $2.01 billion IPO led a pack of healthcare companies joining the public market in the second quarter of 2020 that raised $10.45 billion — the most for the quarter in the past five years, according to data compiled by S&P Global Market Intelligence.

The proceeds from IPOs for the sector are the highest in a five-year period starting from 2015, largely as a result of Royalty Pharma's contribution as the biggest U.S. IPO for the year so far.

The quarter saw 54 healthcare companies go public globally — with most of them based in China — raising the total number of IPOs completed in the sector to 90 as of June 30. Overall, healthcare companies have raised $15.71 billion through IPOs in the year, which is more than the amount raised in 2015, 2016 and 2017.

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Ernst & Young, or EY, noted in a quarterly IPO trends report that global IPO activity declined sharply between April and May — 48% and 67%, respectively — compared to the previous year, mostly due to the impact of the COVID-19 pandemic. However, there was a rebound in IPO activity across all regions in June, with a third of the total IPOs for the year occurring in the month.

The professional services firm tracked a total of 186 completed IPOs for the second quarter raising a total of $41.1 billion, out of which 43 offerings were completed in the Americas raising $16.2 billion. EY noted that the Nasdaq leads the pack with the number of proceeds from IPOs in the year, followed by the Shanghai stock exchange and Hong Kong stock exchange.

EY's assurance and advisory partner, Paul Go, noted in his June 24 article that IPO deals in the healthcare sector were the third-highest for the year, only behind the industrial and technology sectors. Whereas in terms of proceeds, the healthcare sector came in second from the top, with technology lead the pack.

New York-based pharmaceutical company Royalty Pharma priced its IPO at $28 per share, with the second-highest per-share price for the quarter. The company, which operates as a buyer of biopharmaceutical royalties, was also the only company to have crossed the $1 billion mark in proceeds raised, enabling the total amount generated for the quarter to beat the previous years.

The company's shares saw a significant jump from the initial price in their debut, closing at $44.50 on June 16.

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Piscataway, N.J.-based biopharmaceutical company Legend Biotech Corp. — a spinoff of China's Genscript Biotech Corp. — had the second-highest proceeds among the U.S.-based companies, raising about $487.3 million in a June IPO. The company also had the fourth-highest proceeds raised among global healthcare IPOs during the quarter.

With an offering size of above $200 million, a total of 19 healthcare companies went public globally, out of which eight were from China and seven from the U.S. Among these companies, five IPOs were upsized following their initial pricing.

EY noted in its report that 114 offerings were completed in the Asia-Pacific region for the quarter raising $18.2 billion, while 29 IPOs closed in the Europe, Middle East, India and Africa region raising $6.7 billion.

Pharmaceutical company SK Biopharmaceuticals Co. Ltd. — the only South Korean company in the bracket — raised the second-highest gross proceeds of $541.8 million. The Seoul-based company, which develops therapies for central nervous system disorders, also had the highest per-share price of $40.70 among the IPOs tracked.

Among the Chinese companies in the list that went public during the quarter, Zhejiang, China-based surgical instrument manufacturer Kangji Medical Holdings Ltd. raised the highest amount, with $464.2 million in proceeds after listing on the Hong Kong stock exchange. Also, the company had the lowest per-share price of $1.79 among all the companies.

Zhongshan, China-based Akeso Inc. had the second-highest IPO proceeds in China, amounting to $382.9 million.

Lausanne, Switzerland-based cancer drugs developer ADC Therapeutics SA was the only Swiss company in the list that completed an IPO in the quarter, raising $267.6 million in gross proceeds. The company's stock began trading on the NYSE on May 15.

Canada's Fusion Pharmaceuticals Inc., which develops therapies for chemotherapy-resistant cancers, raised the lowest amount on the list with $212.5 million in gross proceeds, followed by Cambridge, Mass.-based gene-therapy maker Generation Bio Co. which raised about $230 million in an IPO.

EY said in its report that it expects a further rebound of IPO activity in the second half of 2020; however, the firm noted continued uncertainties that include a possible second wave of COVID-19, U.S.-China tensions, Brexit negotiations, the U.S elections and low oil prices, all of which could potentially negatively impact the rebound seen in June.