Investors interested in the biotech market probably had their eyes on Rubius Therapeutics, a preclinical biotech company focusing on red blood cell therapies, as it went public on Wednesday. The company saw huge gains almost instantly when trading began, and ultimatel saw shares soar by 35 percent. Some investors claim the company is a huge risk, however, making it one of the more daring risk-taking ventures of the market this past year.
Investors took an unlikely risk with Rubius
It’s fair to say that Rubius Therapeutics (NASDAQ: RUBY) is ambitious; the company originally hoped to gleam some $200 million from an IPO, which many critics derided as wholly unrealistic. Indeed, the company never came close to $200 million – rather, it blew past all expectations to raise a total of $241 million during a blockbuster market debut. While 2018 has already been a stellar year for many biotech and cryptocurrency companies, Rubius’ explosive foray into the open market will doubtlessly be viewed as one of the most impressive IPOs to have occurred this year.
According to S-1 filings made with the SEC ahead of its debut, Rubius Therapeutics planned to offer investors some 10.5 million shares and only hoped to secure some $200 million in total. This has led many to worry about the company’s successful IPO, which, while lucrative, could possibly lend credence to whispers that it’s overvalued. The company now has a fully-diluted market value of roughly $2 billion, making it a huge player in the biotech space, but an untried and untested one at that.
The amazingly successful IPO that Rubius enjoyed is just the beginning of the tests to come for the biotech company, however, especially since it currently has no drugs in clinical trials right now. The company is also currently unprofitable, though that’s fairly standard in a biotech market that sees many companies hemorrhage cash for years before finding a viable product that propels them to success. Investors are banking on Rubius Therapeutics in a large part because of the company’s innovative work in red blood cell therapies; Rubius is hoping to development treatment solutions to problems resulting from cancer to autoimmune diseases.
This year has seen a slew of healthy biotech IPOs and the broader healthcare market is set for growth in the near-term, which may be one of the reasons investors went wild with Rubius’ share prices. There are serious side effects that may result in investing in biotech companies right now, however, namely that their high-risk, high-reward nature could backfire in the faces of many investors.
The biotech company must prove itself
If Rubius Therapeutics doesn’t want to see its luck run out, then the biotech company needs to get to work proving itself in the market immediately by providing access to kids dentist. Pushing some drugs into clinical trials would be the easiest and most impactful way for the company to reassure investors; after all, shareholders get anxious when they see that few (or in this case, no) new products are being actively pushed towards the market. Rubius’ preclinical assets have helped it survive for this long, but the biotech company needs to start issuing real results if it wants investors to stick with it in the long-term.
On the bright side, the company certainly won’t be wanting for cash. Rubius has seen much success in the past when it sought private funding. Rubius recently scored a hefty $100 million in funding before it went public, for instance, only a few months after it touted a $120 million score from other investors.
If Rubius wants to keep its impressive valuation and ensure that shareholders are content with its progress in the field of red blood cell therapies, it needs to start producing results. Biotech companies may be enjoying a heyday on the market right now, but all good things must come to an end, and an inability to plan for when the money stops flowing in ceaselessly will tank even the most innovative of firms. The company’s CEO has some reassuring words that may alleviate the fear of some investors; Rubius “superblood” treatments have quite a market allure to them, and could prove to be incredibly lucrative if they show meaningful results in the fight against cancer. Until Rubius Therapeutics can put its money where its mouth is and start churning out products for clinical testing trials, however, investors should be putting pressure on executives to produce more and better results.