Biotech companies are facing challenges in returning to US equity markets, with IPOs remaining limited.

Only five biotech firms have gone public this year, raising over US$50 million, compared to 18 IPOs in 2024.

The sector’s decline contrasts with the pandemic boom, when around 150 biotech companies went public over two years starting in 2020.

The most recent notable IPO was Aardvark Therapeutics’ US$98 million debut in February 2025, which has seen its stock price fall over 30% from the initial US$16.

Investor confidence is hurt by regulatory uncertainty, including the US Food and Drug Administration (FDA) budget threats and unclear drug pricing policies.

Biotech stocks have broadly underperformed, with most IPOs since 2024 trading below listing prices and the Nasdaq Biotech Index falling 4% in 2025.

Analysts see hope in later-stage firms, but rising costs and policy risks still limit broader recovery in biotech investments.

🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ Biotech IPO patterns follow predictable cycles tied to market performance

The current biotech IPO slowdown mirrors historical patterns where market enthusiasm swings between extremes.

The 2020-2021 pandemic period saw approximately 150 biotech companies go public in just two years, creating a bubble reminiscent of previous biotech IPO surges like 1991’s record of 35 IPOs 1.

This cyclical nature is evident in recent data showing Q1 2024 biotech IPOs raised $3.72 billion, significantly higher than Q4 2023’s $621 million, indicating the beginning of a potential recovery cycle 2.

The current trajectory suggests a return to pre-pandemic norms of 30-40 biotech IPOs annually as observed from 2017-2019, rather than a permanent market freeze 2.

Performance data reveals a consistent pattern: 67% of smaller market cap IPOs end up trading below their offering price, explaining investors’ current preference for larger, more established companies 3.

2️⃣ Regulatory uncertainty creates tangible impacts on biotech investment patterns