Third Harmonic boosts biotech with sectorâs top IPO in four months
Third Harmonic Bio has raised $185 million in the largest initial public offering for the biotechnology sector since early May.
The Cambridge, Massachusetts-based biotech said Wednesday evening that it sold 10.9 million shares for $17 apiece. Total proceeds could be higher if the banks underwriting the offering buy more shares at the IPO price. The company will begin trading on the Nasdaq stock exchange Thursday under the symbol “THRD.”
The offering is a financial boost for Third Harmonic, a three-year-old startup that will use the money to advance a drug for allergic and inflammatory diseases, including a chronic form of skin hives called urticaria. It’s also a positive sign for emerging biotech companies and their venture backers, as IPOs have largely ground to a halt in 2022.
Third Harmonic’s IPO is only the 18th of the year in biotech, compared to 84 by this time in 2021, according to data from BioPharma Dive. Last year’s pace led to a record total for new biotech stock offerings and marked the peak of a period in which new drugmakers were formed, funded and pushed public faster than previously.
Some investors interviewed by BioPharma Dive this year described a “lack of discipline” in that run and noted a “disconnect” between the values companies received and their actual worth. Others have said too many drug companies went public too quickly.
As 2021 went on, the stock prices of newly public biotechs tumbled, leaving more than 90% of them trading below their offering price by the year’s end. General investors who helped fuel the sector’s run turned away from biotech, leading to an IPO slump that has endured for months.
The size of IPOs that have priced has steadily declined, too. Before Third Harmonic’s offering, the majority of companies that went public in 2022 raised less than $40 million. The last two drugmakers to raise more than $100 million via IPO — neuromuscular disease drug developer PepGen and Bausch & Lomb, the medicine business of Bausch Health — priced offerings on May 6. Other than Third Harmonic, no other biotechs with publicly disclosed plans for a new offering have sought that high a figure in months.
Third Harmonic’s offering could signal renewed interest in biotech IPOs. The company achieved the value it sought, pricing shares within its expected range and selling roughly 2 million more than anticipated. There are also other signs of a turnaround in the biotech sector’s fortunes. A string of positive clinical trial readouts and deals lifted the industry over the summer, helping boost a widely followed stock index.
Yet it’s unclear whether Third Harmonic will keep its value, or whether other biotech companies will follow it to public markets. More than half of biotechs to go public this year trade below their offering price, as do 91 of the 104 that debuted last year.
Third Harmonic’s next stock-moving event is early-stage clinical trial data that are expected in 2023. That study is testing Third Harmonic’s drug in a type of urticaria, a condition for which the company is using a similar treatment approach to Celldex Therapeutics. Celldex’s drug, which has shown promise in early testing, is injected, while Third Harmonic’s candidate is taken orally.
Founding investor Atlas Venture held about 38% of Third Harmonic’s stock prior to the offering.
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