Kenvue’s strong IPO may not signal an opening in the market

Kenvue, Johnson & Johnson’s consumer health spinoff, raised $3.8 billion in its initial public offering (IPO) last week, making it one of the largest IPOs since 2021. But we’re not out of the woods yet, as Taylor Swift would say, especially if you’re a biotech company looking to go public.

While Kenvue’s success offers “optimism inside the marketplace” for other companies looking to go public, the deal doesn’t signal an opening in a market that remains “pretty dismal from an IPO perspective,” Centri Business Consulting Partner and Chief Revenue Officer Christopher Mora told Healthcare Brew.

The market has yet to match the biotech IPO boom in 2021, when more than 100 biotech companies raised almost $15 billion in IPOs, BioPharma Dive reported.

“[The Kenvue IPO] also might, on the other side, give a false sense of hope to other types of biotechs or life science companies that may be pre-revenue that maybe see this as an opening to the IPO market,” Mora said.

The IPO valued Kenvue at around $42 billion, Bloomberg reported. Its strong opening comes from the fact that Kenvue is a “proven company,” Mora said. Kenvue’s portfolio includes brands like Tylenol, Band-Aid, and Neutrogena, and the consumer health segment earned $14.6 billion in revenue in 2021, according to a press release announcing Kenvue’s formation.

“If you look at the brands that are underlying Kenvue…they have a proven track record of profitability, cash flows, and being a strong brand in the marketplace, and those types of conditions and profitability and cash flows are one that are going to survive certain uncertainties inside of the marketplace,” Mora said.

Biotech companies can “access major global finance hubs and capital from a deep pool of investors around the world” through an IPO, according to a 2021 report from law firm Baker McKenzie. That’s especially important if a biotech company wants its medications to be FDA approved—prescription drug application fees for FY2023 can cost more than $3 million.

But biotech companies are not hitting the brakes too soon. Last week, biopharma company Acelyrin, which develops medications for immunological diseases, set out to raise $540 million in its IPO, according to a press release. It would be the largest IPO for a biotech startup since 2021.