Cancer drug developer CG Oncology (CGON.O) notched up a valuation of $1.75 billion in its market debut on Thursday, after its shares jumped 52.6% at the open, as new listings pick up pace.
The IPO market is looking for a turnaround in fortunes as bets of a soft-landing for the U.S. economy rise, after a two-year dry spell fueled by the Federal Reserve's aggressive interest rate hikes and geopolitical pressures.
The Irvine, California-based company debuted at $29 per share on the Nasdaq, above the upsized offer price of $19 apiece. The firm sold 20 million shares in its offering and raised $380 million.
CG Oncology's initial public offering (IPO), the first by a biotech firm this year, sets the stage for other healthcare companies such as KKR-backed BrightSpring Health Services and Moderna-backed Metagenomi.
Investment in biotech companies over the past two years has been a fraction of historical levels. After 108 IPOs in 2021, there were only 18 each in 2022 and 2023 as of mid-December.
A basket of biotech-focused funds tracked by Piper Sandler saw $15.8 billion in capital outflow in 2023, the largest ever going back to 1992, according to the brokerage.
"Investors are likely to be choosy when it comes to biotech IPOs, and are likely to search out more mature offerings and put weight behind those which appear to have greater chances of drug approval, with clinical trials already underway," said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
CG Oncology is conducting a late-stage trial of its bladder cancer therapy called cretostimogene grenadenorepvec, an engineered virus that replicates in certain defective cells present in most urothelial carcinomas.
Morgan Stanley, Goldman Sachs, Cantor and LifeSci Capital are the underwriters to the IPO.
