OraVax Inc. stepped into what has been a chilly climate for initialpublic offerings (IPO) by biotechnology companies and experiencedone of the warmest greetings of the past year.

The Cambridge, Mass.-based company, which is developing oralvaccines and antibodies for diseases that infect mucosal tissues,raised $23 million through the sale of 2.3 million shares at $10 pershare. The stock (NASDAQ:ORVX) closed Thursday down 87 centsto $9.12.

Although OraVax sold 300,000 shares less than the 2.6 million itregistered and fell $1 short of its targeted price range of between $11and $13 per share, the IPO was the most lucrative for abiotechnology drug company since January 1994.

However, David Crossen, an analyst with UBS Securities in NewYork, said OraVax's performance does not signal a renewed interestfor biotechnology start-ups on Wall Street.

"The capital markets may be modestly, modestly more receptive toIPOs under certain conditions," he said. Among those conditions areadvanced products with good clinical trial data and corporatepartnerships.

The OraVax IPO is the third this year. Seattle-based OstexInternational Inc., primarily a diagnostics firm, raised $33.25 millionin February. And SunPharm Inc., of Jacksonville, Fla., collected $7.7million in January to support development of drugs for cancer andAIDS-related chronic diarrhea.

In contrast, 16 companies went public by the end of May 1994,according to BioWorld Financial Watch records.

OraVax, founded in 1990, has two products in clinical trials. Themost advanced is in Phase II studies to prevent viral pneumonia inchildren with respiratory syncytial virus. The vaccine, called HNK-20antibody, is administered by nose drops and uses monoclonalimmunoglobulin A antibodies to neutralize the virus.

The second product, a urease-based oral vaccine for Helicobacterpylori, is in Phase I studies. The treatment involves stimulating animmune reaction by delivering a non-toxic form of an enzyme thatenables the bacteria to survive.

In April, OraVax signed a potential deal worth up to $17.1 millionwith Pasteur Merieux Serums & Vaccins S.A. for the development ofvaccines against H. pylori. Pasteur Merieux, a subsidiary of France-based Rhone-Poulenc S.A., paid $5.1 million up-front; a $2.5 millionequity investment and $2.6 million in cash. The company alsopledged another $12 million for milestone payments.

OraVax has a third major product in preclinical trials. The drug is anoral vaccine for colitis and antibiotic-associated diarrhea.

Underwriters were Donaldson, Lufkin & Jenrette Securities Corp.and Cowen & Co., both based in New York. They have the option ofpurchasing up to 345,000 shares to cover over allotments. n

-- Charles Craig

(c) 1997 American Health Consultants. All rights reserved.