At least three proposed initial public offerings by biomedicalcompanies have been delayed or withdrawn, signaling that theIPO window is no longer wide open for the class of '92.

Although 17 companies have raised $634 million in IPOs so farthis year, the 36 percent decline in biotech stock prices sincethe January peak has increasingly battered new stock offerings,leaving companies with disappointing returns.

The IPOs that have been postponed or withdrawn were hopingto raise at least $92 million: Tanox Biosystems Inc.'s proposedoffering of 1.75 million shares at $16 to $18 per share, CellGenesys Inc.'s 3 million shares at $11 to $13, and GenDermCorp.'s 2.6 million shares at $12 to $14.

"You have to put the IPO class in the context of the overallbiotech stocks," said analyst Joyce Lonergan of Cowen & Co."Last year, IPOs underperformed the whole universe, but thisyear the whole universe is down. So why buy an IPO when youcan buy an established company?"

With both new and older companies to choose from, it'sbecoming a buyer's market. "It's a tough market now," saidJeffrey Posner, syndicate manager at Sutro & Co. "Investors arebeing extremely picky. Any company that comes out in thismarket is likely to have to make a price concession."

The three most recently completed offerings came out atreduced prices. Telios Pharmaceuticals Inc. lowered its price to$8 from between $10 and $12, CytoTherapeutics Inc. droppedits price to $11 from $12 to $14, and Seragen Inc. slashed itsprice to $12 from $17 to $20. While the three raised $81million, they had hoped to pull in at least $27 million more.

The overall quality of offerings may also be declining. "Therewas a time when every offering was a high-quality growthstory," Posner said. "I'm beginning to see some morequestionable types of companies coming out."

What's different now is that more investors are doing theirhomework. "Last year, investors weren't asking the detailedquestions," said Lonergan. "Now we're seeing more duediligence during the road show."

Secondary offerings are not immune either. Earlier this month,Icos Corp. (NASDAQ:ICOS) added a supplement to itspreliminary prospectus stating that George Rathmann,chairman, president and CEO, would buy up to 1 million of the3 million shares being offered. Microsoft Corp. ChairmanWilliam Gates, an Icos director, committed to buy up to500,000 shares.

"It was an impressive move," said Posner. "It shows thecompany has confidence in itself and lends credence to thestory."

The offering was completed last Wednesday at $9, withRathmann purchasing 300,000 shares and Gates buying150,000.

"They felt that if they were asking the public to buy stock in amarket that's increasingly tough, they should be willing toshow their faith in the company by buying stock alongside thepublic," said Janice LeCocq, executive vice president of financeand administration at the Bothell, Wash., company.

Nevertheless, companies continue to file for initial offerings."Companies want to be ready if the window opens up again,"said Nomura Research Institute analyst Jay Silverman.

Since offering prices began declining with the Telios deal onMarch 19, eight companies have filed, including TriplexPharmaceutical Corp., Biocircuits Corp., Alpha-Beta TechnologyInc., PerSeptive Biosystems Inc., Biovail Corp. International,Oclassen Pharmaceuticals Inc., Cantab Pharmaceuticals plc andGliatech Inc. That group is looking for a minimum of $199million.

-- Karen Bernstein BioWorld Staff

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