Here's the familiar pattern for hot new offerings: Trading starts, and the stock shoots up. The underwriter issues a "booster-shot" research report. As the stock continues to fly, the venture capitalists (VCs) bail out. By that yardstick, Creative Biomolecules (CBMI) is unusual: It went public at 7 a share in 1993 and climbed to 11, but big VC groups stayed put--and bought more in the post-IPO period. When the stock reversed course and fell to 3 in mid-1994 in the Street's retreat from biotechs, VCs upped their buying. It has since rallied, closing at 83/8 on Jan. 16.
What's going on? "We assume that Creative must be on to something if an astute VC group is increasing its exposure instead of bailing out," says Marc Strausberg, editor of The Livermore Report in Wilton, Conn., which usually focuses on VCs' negative influence on IPOs.
A big VC investor in Creative is Alan Patricof, who has cashed in on such winners as SunGlass Hut and America Online. He holds a 28% stake in Creative, which is trying to develop breakthrough protein therapies for tissue regeneration and restoration. The company's lead compound, OP-1, is a protein capable of stimulating bone growth for repair or replacement of weakened bone and joint tissue.
The importance of OP-1, says Strausberg, is reflected in the $75 million that its partner in the program, Stryker, a maker of surgical and medical gear, has poured in. Analysts expect positive results from the European pilot trial by yearend. They expect Creative to file for FDA approval of OP-1 in 1997.
One money manager figures the stock is worth 15 a share.