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Hedge Funds Hope to Cash in on Biopharma IPO

The IPO market is starting to show signs of life — and health care is one of the most active sectors.

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Illustration by II

Rapport Therapeutics, another biopharma company with hedge fund backing, recently filed initial plans to go public. So far, it has not disclosed how many shares it plans to offer, what price it will seek, or the amount of capital it hopes to raise.

Rapport is a clinical-stage biopharmaceuticals company focused on developing small-molecule medicines for patients suffering from central nervous system disorders. At least one hedge fund firm is listed in Rapport’s regulatory filing as an owner of a minimum of 5 percent of the shares: Cormorant Asset Management. The filing does not indicate how many shares the hedge fund owns or its stake in the company.

Rapport completed two significant financings in 2023.

In August 2023, Cormorant led a $150 million Series B funding round, according to a press release at the time. Specifically, the firm shelled out about $25 million for a little more than 14.9 million Series B convertible preferred shares, the regulatory filing says. Cormorant Global Healthcare Master Fund, Cormorant Private Healthcare Fund III, Cormorant Private Healthcare Fund IV, and Cormorant Private Healthcare Fund V participated in the funding, per the filing.

The Series B financing included a slew of other major investment firms, including hedge funds Perceptive Advisors, Surveyor Capital (a Citadel company), and Logos Capital. None of the three firms, however, is listed in the regulatory filing as a 5 percent owner.

In announcing the Series B financing, Rapport also noted that Raymond Kelleher, who has been managing director at Cormorant since July 2020, was appointed to the board of directors. But in the IPO filing, Rapport said that Kelleher plans to resign from the board immediately, before the effectiveness of the registration statement. The company stressed that the resignation is “not due to any disagreement with us or any matters relating to our operations, policies, or practices.”

In April 2023, Rapport also raised $100 million in a Series A financing from Third Rock Ventures, ARCH Venture Partners, and Johnson & Johnson Innovation, all of which also participated in the Series B round.

The IPO market in general is starting to show signs of life. So far this year, 58 IPOs have been priced, up 31.8 percent from last year, according to Renaissance Capital. An additional 80 IPOs have been filed this year, a 6.7 percent increase from 2023.

Health care has been one of the four most active sectors this year, along with industrials, consumer discretionary, and technology.