By Nancy Volkers

Special to BioWorld Financial Watch

While most of the country is thinking about Y2K, the biotech industry seems to be concentrating on a different acronym: IPO.

Initial public offerings have been slow all year. Besides Genentech Inc.'s nearly $2 billion offering in July, the biotech sector has seen only three companies go public between June and October ­ raising $141 million ­ and only two others file to go public.

Last year looked much the same, to a point. IPO activity in 1998 was at a near-standstill after July, with only two companies ­ Centaur Pharmaceuticals Inc. and Antisoma plc ­ going public in the fall and early winter. But that's where comparisons end. Whereas on the IPO front November 1998 was quiet, last month a handful of U.S. companies became poised to go public, and some Canadian companies took the plunge as well.

"What's very interesting right now is that the financings in registration are all IPOs," noted Peter Ginsberg, senior research analyst at U.S. Bancorp Piper Jaffray in Minneapolis. "There are five IPOs in registration ­ that's pretty unusual, since early in the fall it was primarily follow-on offerings."

But those follow-on offerings did well and rewarded investors, bolstering confidence in the biotech sector, Ginsberg said.

And so the initial public offerings: late last month, Antigenics LLC, of New York and Woburn, Mass., announced plans to raise $46 million in an IPO to fund clinical, preclinical and development activities. Antigenics' lead product, Oncophage, is a cancer vaccine currently being tested in six Phase II or Phase I/II trials in gastric, colorectal and renal cell carcinoma, as well as in metastatic melanoma. The company plans to start Phase II trials to treat sarcoma and low-grade indolent non-Hodgkin's lymphoma, as well as a pivotal Phase III trial in renal cell carcinoma, by mid-2000.

Also late in the month, Sequenom Inc. announced plans for an IPO that could raise the company $70 million. The San-Diego based company would use the funds to develop products, repay a long-term debt, expand facilities and hire additional sales and customer support staff for its expanding single nucleotide polymorphism (SNP) genotyping business.

In Canada, two small companies went public. Genomics One Corp., of Laval, Quebec, raised C$3.75 million (US$2.56 million) in its initial public offering. The company, which is focused on technology platforms, now trades under the symbol GNX on the Montreal Stock Exchange. Oncolytics Biotech Inc., of Calgary, Alberta, closed its IPO of 4 million common shares at a price of 85 cents per share, raising the company C$3.4 million (US$2.3 million). Shares will trade on the Alberta Stock Exchange under the symbol ONC.

Three California companies ­ Caliper Technologies, of Mountain View; Tularik Inc., of South San Francisco; and Maxygen Inc., of Santa Clara ­ filed for IPOs recently, and plan to raise $62 million, $93 million and $85million, respectively, if overallotment options are exercised.

Caliper has filed for an offering of 3.6 million shares of its common stock, plus an overallotment option of 540,000 shares, at a price between $13 and $15 per share. Tularik plans to offer 6.25 million shares, plus 937,500 shares as an overallotment option, between $11 and $13 per share. Pharma Vision 2000 AG, Tularik's largest stockholder, will be offered 1,468,750 shares of common stock in the direct offering, allowing the company to maintain a 23.5% stake in Tularik.

Maxygen plans to offer 5 million shares of stock at an asking price between $11 and $13 per share. There is an overallotment option of 750,000 shares. Up to 1.33 million shares are reserved for sale to R.A. Investment Group and Affiliates and to Pioneer Hi-Bred International, each an existing Maxygen stockholder.

Amid the IPOs last month were public and private offerings as well, some of them raising substantial funds. On Nov. 19, ImClone Systems Inc., Progenics Pharmaceuticals Inc. and Alexion Pharmaceuticals Inc. completed follow-on offerings totaling nearly $165 million.

The Alexion financing, which raised $47.8 million for the company, including overallotments, was "a very well- received offering," said Eric Schmidt, biotech analyst at SG Cowen Securities Corp. in New York. "They had a strong fundamental story, and the timing was right, given that they had some early but very exciting data on rheumatoid arthritis that coincided with their road show."

The data concerned Alexion's 5G1.1, in trials for rheumatoid arthritis and membranous nephritis. Proceeds from the financing will also help fund preclinical research, drug discovery programs and clinical and manufacturing development. Alexion has a market capitalization of about $265 million; for the fiscal year ending July 31, the company's revenues totaled $18.8 million, up from $5 million in the previous fiscal year.

Schmidt calls Alexion a "middle- to late-stage developmental story" in the biotech arena, and says that the times are changing for the better for such enterprises. "For those types of companies in general, the market is quite receptive," he said. "Most of the offerings that have been successful in 1999 have been at the Alexion stage or even later. The market has definitely been willing to fund those stories nearing commercial or late-stage trials."

Now, the tide may be turning to favor even earlier-stage companies, such as those currently completing IPOs, Schmidt said. "There are a few earlier-stage IPOs ­ Maxygen, Tularik, Caliper ­ if those are completed successfully, it will in essence be open season on the market."

Ginsberg agreed that the market seems to be opening, and attributed it to two factors. "One, the sector is coming into its own, moving into the growth phase of its life cycle, with a lot of products being launched and doing quite well. Secondly, we have consolidation; we seem to be seeing a large number of acquisitions. I think 2000 will be the year of acquisitions in the biotech industry." *