The number of healthcare IPOs in 2021 had overshot the total for 2020 by the end of September, according to an analysis by S&P Global Market Intelligence, with Chinese companies leading the charge.

The 94 global healthcare IPOs in the third quarter of 2021 raised a total of $14.04 billion, surpassing the 86 IPOs and $13.61 billion raised in the year-ago period. However, the most recent quarter still marked a drop from the 112 deals and $15.64 billion raised in the second quarter of 2021.

The third-quarter offerings brought the total number of healthcare IPOs for 2021 to 292 as of Sept. 30, against the 264 IPOs across the whole of 2020. The $44.20 billion raised in the first nine months of 2021 was almost level with the $44.91 billion raised in total last year.

Despite the drop from the second quarter of 2021, Michael Cole, the healthcare industry leader for Alvarez & Marsal's transaction advisory group, pointed out that this year still saw the highest third-quarter IPO volume in the last 20 years.

One of the reasons so many companies are opting to IPO is because of the large amount of liquidity and "dry powder" in the capital markets, Cole said in an interview. Healthcare companies, particularly those that are in tune with consumer trends, are able to take advantage of this investor interest.

"There's just a lot of demand for companies that can do a lot of things, and in healthcare that's responding to the need for innovation, namely, in the life sciences and biotech side on the heels of the pandemic and [the] increased need for digitization," Cole said.

"Consumers are now demanding that you can do more and more on your phone and on your computer, whether that's telehealth or developing AI-type technologies and building those into the healthcare platform," Cole added. "All those factors are creating the perfect storm for a huge amount of demand."

Chinese healthcare companies featured prominently among the crowd of IPOs during the quarter with Sino Biological Inc. — a biotech that also provides contract research services — leading the pack with its $767.8 million offering on the Shenzhen Stock Exchange. Since it went public, the company's share price had fallen 34.3% at close of trading Nov. 5, according to S&P Global Market Intelligence data.

Fellow Beijing-based company Medlive Technology Co. Ltd., which offers an online learning platform for physicians, raised $543.1 million from its IPO on the Hong Kong Stock Exchange, the third-highest proceeds during the quarter.

Because of rules allowing pre-revenue biotechs to list on its exchange, Hong Kong has now become Asia's largest IPO market for healthcare companies and the second-largest market for healthcare globally, according to Paul Go, global IPO leader at EY. While the exchange has become a hub for pre-revenue biotech listings, investors have had trouble differentiating the quality of these various companies, Go said in an interview.

"The Hong Kong stock market is very strong right now for healthcare IPOs, but [the market needs] to make sure that they can keep up the standard so that they can continue to attract the right quality biotech companies to get the necessary fundings," Go added.

Another major driver for the third-quarter growth in global IPOs was a rebound in the Middle East, India, Africa and Europe — where the London Stock Exchange is making a comeback as uncertainty from Brexit declines, Go said.

DNA sequencing company Oxford Nanopore Technologies Ltd. had the second-highest valuation of the quarter with its $578.7 million IPO on the London Stock Exchange. The listing bucked the recent trend for U.K.-based biotechs and life sciences companies passing on London in favor of the U.S.' Nasdaq.

On its first day of trading, the biotech's share price rose as much as 47%, giving the company a valuation of about $6.7 billion at the time, although the company was trading down 14.8% at market close Nov. 4. Oxford Nanopore's strong initial performance helped redeem the London stock market's image after a series of disappointments, particularly the lackluster investor response to the first-quarter listing of online meal delivery service Deliveroo PLC in March, according to Go.

"What we see with Oxford Nanopore [is] if you are in the right sector, and you are actually generating good revenue and profit, the London Stock Exchange will be able to just be as competitive [as the U.S.]," Go added.

However, when it comes to large IPOs, the Nasdaq remains by far the most popular avenue for healthcare company listings, accounting for 43% of healthcare offerings and 45% of the proceeds raised in the year to date, according to Go. Nasdaq healthcare listings in the third quarter were led by Definitive Healthcare Corp., which provides data and analytics used by healthcare companies to target their products and solutions effectively.

Alvarez & Marsal's Cole said he expects a slight drop in IPOs for the fourth quarter due to seasonality, while 2022 may not reach the highs of the previous two years due to threats of inflation, the U.S. Federal Reserve's balance sheet tapering and possible tax changes coming out of Washington, D.C. However, the healthcare industry's strong performance compared to other industries will likely keep investors interested, Cole said.

"Healthcare has outperformed because of how it fits into the economy now, and it's certainly not going to decline," Cole added. "It's well over 20% of [U.S.] GDP and it's going to continue to evolve and grow as innovation and technology move it forward."