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Even as Testing Demand Started to Wane, COVID-19 Drove IPOs in Dx Space in H1 2021

NEW YORK – Even as demand for SARS-CoV-2 testing began to wane throughout the first half of 2021, the ongoing COVID-19 pandemic, along with the emergence of special purpose acquisition companies as mechanisms for companies to go public, created a pathway for diagnostics companies to the public markets.

Through the first half of 2021, eight diagnostic companies have gone public or filed for IPOs. In the diagnostics industry, where initial public offerings are often rare to come by, some may see that as a banner market for IPOs in the space, but experts cautioned that going public is just a first step and emphasized that firms must have additional product offerings besides COVID-19 testing to succeed as publicly traded firms.

Indeed, already there are signs of softness among firms that have gone public this year, and not all companies have managed to maintain the prices at which they went public, and the market has been less solid in 2021 compared to 2020, based on companies’ post-IPO performances, according to Jon Norris, managing director at Silicon Valley Bank.

The eight companies in the diagnostic space who have gone public or filed for IPOs in the first half of 2021 are Ortho Clinical Diagnostics in January; Lucira HealthTalis Biomedical, and Sema4 through a special purpose acquisition company, or SPAC, in February; Prometheus Biosciencesand SomaLogic through a SPAC in March; LumiraDx through a SPAC in April; and Gingko Bioworks through a SPAC in May.

Among those eight, Ortho Clinical had the highest proceeds from its IPO by far, raising approximately $1.4 billion, while Talis Biomedical came second, raising $254 million. Prometheus Biosciences raised $218.5 million in gross proceeds after expecting $190 million, and Lucira Health raised $153 million.

LumiraDx intends to go public through a merger with CA Healthcare Acquisition that has an equity valuation at closing in excess of $5 billion, according to CA Healthcare Acquisition.

Sema4’s expected proceeds from its merger with CM Life Sciences are $793 million after a valuation of roughly $2 billion, and SomaLogic’s merger with CM Life Sciences II is expected to reap funds of $651 million after the company was valued at $1.2 billion.

Ginkgo Bioworks also announced its intention to merge with Soaring Eagle Acquisition, with expected proceeds of up to $2.5 billion and a $15 billion pre-money equity valuation.

Compared to this time in 2020, when four companies went public and all raised less than $300 million, the IPO market this year looks robust. But Norris cautioned that the performance this year has dropped a bit in comparison to last year.

While there has been “more activity,” he said “the performance [post-IPO] has not been as good.”

Harry Glorikian, a diagnostic industry consultant and general partner at Scientia Ventures, said that despite the increased investor interest in the diagnostics industry, there needs to be “more selectivity” to ensure companies are prepared for going public and “can maintain positive pricing on their stock.

by Kelsy Ketchum, June 30, 2021 08:55 AM

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