Institutional investors, who have been inundated with publicofferings by biotechnology companies, are becoming morepicky about their investments.
That attitude is reflected in the response to the initial publicoffering (IPO) completed Friday by Isis Pharmaceuticals Inc.Isis sold 2.5 million shares at $10, grossing $25 million. Thecompany had hoped to raise $39 million to $45 million with 3million shares priced between $13 and $15.
The offering reflected market conditions, said Yasunori Kaneko,Isis' chief financial officer.
"It's just becoming a much tougher market," said Mark Simon, abiotech analyst at Robertson, Stephens & Co. in San Francisco."People are nervous that many of these IPOs are premature.These companies (like Isis), which have no human data, shouldwait a couple of years. A lot of these should be 1993 IPOs atless money."
Joe Edelman, an analyst at Prudential Bache in New York,agreed. "It's really very simple," he said. "The window isn'tnecessarily closing. The problem is, there are two types ofcompanies going out: those with clinicals and those with noclinicals. I've been advising people to only look at companieswith products in the clinic."
Price is also an issue. The high prices of some offerings givethese companies valuations that "aren't discounting the risk ofsuccessfully developing a product, as well as the long timeframe to market," said Edelman.
Saying companies should wait to go public doesn't meananalysts don't like their prospects. "Of the early-stagecompanies, we think Isis is one of the strongest," said Simon.Isis is developing antisense oligonucleotides.
But, said Edelman, why buy stock in these companies todaywhen you can wait? "Stocks are news-driven until they get aproduct on the market, when they become sales-driven. But forcompanies that are too far from market, there's no news tosustain the valuation."
At least seven companies are waiting to close IPOs, hoping toraise from $23 million to $45 million.
Isis, based in Carlsbad, Calif., has 10.5 million sharesoutstanding after the offering. Its IPO was underwritten byMorgan Stanley & Co. Inc. and Lehman Brothers, both of NewYork. Isis stock (NASDAQ:ISIP) closed unchanged at $10.
-- Karen Bernstein BioWorld Staff
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