Proceeds from healthcare IPOs in the first half of 2021 exceeded those raised in the same period in 2020, creating potential for another record year.

According to data compiled by S&P Global Market Intelligence, 112 healthcare companies joined the public markets during the second quarter, more than doubling the number of IPOs a year ago and raising a total of $15.64 billion. That put total valuation for the first half of the year at $28.8 billion — more than half of the combined offering sizes of IPOs in all of 2020 — led by public exits of healthcare services and biotechnology companies.

The data shows that IPOs accelerated during the second quarter after the first quarter saw 84 IPOs reach $13.8 billion in total valuation.

A Global IPO Trends report by consulting firm Ernst & Young found that in the Americas, healthcare led other industries in number of deals during the first half of the year, representing 36% of IPOs compared to technology's 31%. Technology, however, exceeded healthcare in proceeds raised, reaching 49% of total funds raised while healthcare only accounted for 23%.

Healthcare services company agilon health inc. led the pack of healthcare IPOs with its $1.2 billion public exit in April. The Long Beach, Calif.-based company offers a platform for community-based primary care physicians to help them connect with other physicians and manage patients' needs. Fellow health services companies dentalcorp Holdings Ltd., a Canadian dental practice operator, and LifeStance Health Group Inc., an outpatient mental health service provider, rounded out the top three offerings for the quarter.

All three companies were backed by private equity firms, with agilon backed by Clayton Dubilier & Rice LLC, dentalcorp backed by L Catterton Partners and LifeStance backed by TPG Capital LP. Silicon Valley Bank's Healthcare Investments and Exits mid-year report found that there were 81 venture-backed healthcare IPOs during the first half of 2021.

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While healthcare services sat atop the leaderboard for largest deal proceeds for the quarter, biotech companies led the way in number of IPOs, according to data compiled by S&P Global Market Intelligence.

For the pharmac euticals and life sciences sector, the second half of the year remains promising for IPOs, according to Glenn Hunzinger, U.S. pharmaceutical and life sciences leader at consulting firm PriceWaterhouseCoopers. Hunzinger noted that this sector of healthcare has seen an average IPO raise of about $2 billion total per month, and this trend should continue.

"There are a lot of interesting companies with breakthrough therapies that I think people would love to continue to invest around," Hunzinger said.

Zymergen Inc., a biotech company that engineers molecules from microbes, led biotechs in the quarter in total valuation. The company saw its share price rise 21.5% after it began trading in April, raising more than $650 million in the process including the underwriters' option. However, an Aug. 3 business update provided by Zymergen showed that the company no longer expects product revenue in 2021 and "immaterial" revenue in 2022 after customers experienced difficulty with its Hyaline film product. The company's share price dropped more than 76% to $8.25 at the close of trading on Aug. 4, and CEO and co-founder Josh Hoffman stepped down, leaving former Illumina Inc. CEO and current Zymergen Chairman Jay Flatley at the helm on an acting basis.

"The pipeline of products is as was represented during the IPO, so those products are continuing to be developed by the platform," Flatley said during an Aug. 3 analyst call. "What is thinner than we expected is the pipeline of customers for Hyaline specifically."

U.S biotechs Recursion Pharmaceuticals Inc. and Lyell Immunopharma Inc. as well as Chinese cancer biotech CARsgen Therapeutics Holdings Ltd. and U.K.-based Centessa Pharmaceuticals Ltd., which has a broad pipeline covering many diseases, rounded out the top-valued biotechs. Centessa, along with Oxford, U.K.-based vaccine developer Vaccitech PLC, joined a recent group of biotechs that have entered the public markets through the U.S.' Nasdaq stock exchange instead of their home-based London Stock Exchange.

Hunzinger noted that biotech companies in particular no longer have to rely on being acquired by a major pharmaceutical company in order to raise capital. Instead, the current environment allows them to join the public markets and raise capital through IPOs or through alternative IPOs, known as special purpose acquisition companies.

Biotech companies have gotten to this point partially due to their innovative technologies, Hunzinger said.

"In the last five years as we've seen technology around oncology, cell and gene therapy [and] around new breakthrough therapies, there is a track record of developing the breakthrough therapies, and I think that's given a lot of the investors good appetite to invest around these areas," Hunzinger said.

The second half of 2021 has already seen some high-valued IPOs with healthcare services company WCG Clinical Inc. and biopharma royalty acquisition company Healthcare Royalty Inc. set to trade Aug. 6 with offerings at $765 million and $796.9 million, respectively. In July, Stevanato Group SpA raised about $672 million in gross proceeds after the Italian vial-maker went public on the New York Stock Exchange.

Asia market

While the U.S. led the number of large healthcare IPO listings for the quarter, the number of IPOs in China with an offering size of over $200 million dropped from nine in the first quarter of the year to six in the second quarter.

Though previously listed in the Alternative Investment Market of the London Stock Exchange and on the Nasdaq, pharmaceuticals company HUTCHMED (China) Ltd. further expanded to trade on the Hong Kong Stock Exchange, raising $537.1 million excluding overallotment.

Of the Chinese companies, two were focused on chimeric antigen receptor T cell therapies and vaccines — Changchun BCHT Biotechnology Co. and CARsgen Therapeutics.

In the coming months, the medical device industry is expected to be the next popular healthcare subsector to IPO in Hong Kong, according to Hong Kong-based ICBC analyst Zhang Jialin. The Hong Kong Stock Exchange will also continue to be a mainstream listing venue for other types of healthcare companies, Zhang said.