Even Stuffier....

Sarah Lacy

In February I wrote here, here and here about the biotech IPO market. My thesis? It's always a scramble for these pre-revenue companies to get out, but things seemed a little tougher this year. The response? Some of you agreed with me, but a lot of people said I was nuts. They said demand was still there, investors just wanted to pay venture capital prices. Tell that to the four companies who were supposed to go out in the last month and didn't make it.

Here's the scorecard so far for the year: Four companies have made it out, all at slashed prices of less than $10 per share. Only one, ViaCell, is trading up-- quite handsomely actually at 31%. The next four companies that were set to go out have either pulled or fallen off the face of the earth. This week, Aspreva is set to start trading Friday for between $13 and $15 per share. Next week CombinatoRX is on deck. All I can say is good luck. Biogen-Idec and Elan's bombshell announcement that it would pull one of the most anticipated drugs of the year, Tysabri, has caused sell-offs throughout the sector. Biotech stocks were up modestly today, but they didn't make up for Monday's plunge. That window has to be so tight, it's practically a fire hazard.

I don't mean to be alarmist here. I'm sure it'll open back up, albeit with choosy buyers. After all, it closed for a few months last year and biotech startups still had a respectable showing. And many of these companies seem to have a lot going for them. They'll raise money somehow. There's even some speculation that more of them may take a page out of technology's playbook and get acquired by bigger pharma or biotech companies.

But, even if you didn't agree with me a month ago, just consider the Tysabri impact. The Vioxx and Celebrex debacles were from big pharma, an industry smaller, more innovative biotechs like to say is broken. But Tysabri was a biotech drug. It had been so successful in early phase III trials that it got the Food & Drug Administration's fast track approval. Some analysts expected it to take over as the number one MS drug by year end, with revenues approaching $3 billion in a few years. The withdrawal impresses how risky the sector is, even for a company that's made it to the last stage of clinical trials and has gotten FDA approval.

Want another data point? How about companies filing to go public. Bankers I talked to a month ago expected a dozen more to have done so by the end of February. Only three did. Like I said, good luck, Aspreva.

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