By Jennifer Van Brunt


A small biotechnology service company located in the frozen territory of upstate New York has managed to break the ice surrounding biotech public offerings on the Nasdaq National Market. Albany Molecular Research Inc., of Albany, has not only closed an initial public offering (IPO), which grossed $50 million, but it sold more shares at a higher price per share than anticipated. The company priced 2.5 million shares up from 2.2 million at $20.00 each above the anticipated range of $17.00 to $19.00 on the evening of Feb. 3. When the stock (NASDAQ:AMRI) started trading the next day, it grabbed another $3.75 per share by mid-morning.

This is excellent news, not only for the company in particular, but also for the biotech sector in general. For Albany Molecular's offering was the very first biotech IPO to complete on Nasdaq in a full seven months.

Not that there haven't been a few IPOs in the interim. But those offerings were not completed in any U.S.-based market. Pharming Group NV, of Leiden, the Netherlands, came public on the pan-European exchange Easdaq, as did Antisoma plc, of London. As well, Procyon BioPharma Inc., of London, Ontario, gained a listing on the Alberta Stock Exchange,.and Sunnyvale, Calif.-based Centaur Pharmaceuticals Inc. sought out the stock exchange in Switzerland.

Albany Molecular's timing appears to have been impeccable. The company, which offers a broad range of chemistry R&D services to biotech and pharmaceutical companies, originally filed its preliminary prospectus on July 7, 1998, but postponed the offering in early September due to the then-hostile market conditions for biotech and biotech-related offerings. It got the ball rolling again on Jan. 5, just in time to have red herrings printed and available for all attendees at the Hambrecht & Quist annual healthcare conference in San Francisco. (In fact, Hambrecht & Quist is the co-manager of Albany Molecular's IPO.)

The last biotech IPOs on Nasdaq occurred on July 2, 1998, when both Abgenix Inc. (NASDAQ:ABGX) of Fremont, Calif., and San Diego-based Collateral Therapeutics Inc. (NASDAQLCLTX) came public. Abgenix's stock has enjoyed a healthy run-up since then. It closed the year at $16.25, a gain of 103 percent over its $8.00 IPO price. In fact, the monoclonal antibody company is going in for another round: It filed for a follow-on offering of 3 million shares on Jan. 27. Collateral Therapeutics' stock, on the other hand, managed to slip a little in 1998, ending the year at $7.00, down 3 percent from its IPO price of $7.25.

Over the years, investors have fluctuated hot and cold on biotech public offerings. One glance at the total proceeds of initial and follow-on public offerings, plotted on a quarterly basis, is enough to demonstrate this point (see the graph below for total proceeds from public offerings, by quarter, from 1991 through 1998). The sector hasn't seen a huge financing wave since late 1995. And the last time there was even a peak of interest was in the fourth quarter of 1997. Since then, it's been downhill all the way.

But Albany Molecular's IPO has proven beyond a doubt that investors are still capable of warming up to a biotech public offering. It's too early to tell whether this is an isolated event, however, or a sign of a genuine thaw. The next company to test this hypothesis could be Intracel Corp., which sources say is poised to price its shares any day. The Rockville, Md., company, which is developing a colon cancer vaccine (OncoVax) made from patients' own tumors, has just published encouraging clinical trial results in The Lancet. As well, it is in the midst of preparing a BLA for OncoVax for the post-surgical treatment of Stage II colon cancer.

The widely held perception that the U.S. markets particularly Nasdaq are still giving the cold shoulder to biotech public offerings persists, however. As a result, several U.S.-based IPO-hopefuls are planning on coming public abroad. One of these is Phytera Inc., a firm that creates chemical diversity libraries from extracts of plant cells and marine microorganisms. The Worcester, Mass., company has attracted a number of partners from the pharmaceutical and biotechnology sectors, all of them interested in mining those libraries for potential drug leads. Phytera plans to list its shares on Easdaq and on the Copenhagen Stock Exchange.

On the other hand, the U.S. market looks exceptionally friendly to Australian biotech firm ForBio Ltd., whose shares are already listed on the Australian Stock Exchange (ASX:FBO). ForBio, headquartered in Brisbane, said that a Nasdaq listing will substantially increase the company's market valuation. ForBio has already lined up the underwriters, and anticipates raising about $25 million in the process. In fact, the share price will more than double, due to a five-for-one consolidation of the Australian shares. As well, the company claims that U.S. investors are more interested in technology stocks than are their down-under counterparts, so Nasdaq should be a natural resting place for the shares. ForBio, whose main focus is to use forestry genetics to produce seedlings for tree plantations, has also got a stake in ProBio America Inc., which is adapting the technology for use in humans. It was this technology, in fact, that resulted in the spectacular multigenerational mouse-cloning experiments by researchers at the University of Hawaii last summer.

Still, the technology stocks that really grab investors' attention and their cash continue to be Internet-based companies. The "dot-com" craze is raging even now, with Internet advertiser Modem Media.Poppy Tyson Inc. set to explode any minute. Thoughtful analysts predict that these same investors might turn to biotech stocks also high-risk investments once their ardor for the Internet group has cooled. *