David Nierengarten "Market Cycles and Biotechnology/ Healthcare IPO's" presentation from OIS@AAO 2015

1. Market Cycles and Biotechnology/Health Care IPOs
• Broadly speaking, Health Care IPOs (including Biotechnology, Ophthalmology,
Medical Devices, Diagnostics/Tools) issue when markets are broadly rising and
stop issuing when markets are declining, and generally speaking markets rise with
economic expansions and fall with contractions/recessions.
• Recent record IPO issuance has been aided by increased FDA therapeutics
approvals and broader biotechnology share appreciation (and acquisitions).
• IPO issuance is surprisingly unrelated to actual IPO performance (the “snowflake”
phenomenon—the IPO I’m investing in is special).
• IPO issuance is correlated to economic cycles.

2. Where are we in the cycle?
Best estimate: “The middle”
Indicators (relative to the average economic expansion):
-Unemployment: Low-middle (positive)
-Inflation: Low (positive)
-GDP growth: Low-middle (negative)
-Consumer Spending: Middle (positive)
-Interest rates: Low (positive)
-Business investment (Capital Spending): Low (negative)
When will it end? My favorite predictor is the “Yield curve”—when short term interest rates are
higher than long-term rates, recessions and bear markets follow
-We’re not there (yet)?
15-20%+ declines
Even significant
drops of 15+%
have not broken
the bull market,
or stopped IPO
issuance

3. Recessions
Ruble/emerging market crisis
Competition with Tech $$
Heath Care IPO Issuance Is Broadly Synced to the Economic Cycle
# of IPOs
Yield Curve-
Negative yield curves predict
recessions 12-18 months later
Negative yield curves