Tuesday, February 16, 1993
The orphans who hunger to escape low-price doldrums
Over the past few weeks, shares of Lidak Pharmaceutical Inc.
stock have clawed their way up to nearly $2, more than doubling their price
since the beginning of the year. But while the statistical gain is impressive,
it's not enough to gain the attention of analysts and institutional investors.
Lidak and its low-priced brethren are the orphans of the biotech
industry, developing products with little attention from Wall Street. BioCentury
asked six of these companies how this affected their strategies, how they have
worked around the limitations imposed on them, and how they intend to get the
attention of the Street.
The carrot of success dangled in front of all low-priced companies
is Amgen Inc., which did a first venture round in 1981 at $4, went public in
1983 at $18, and hit a low of $3.75 in November of 1984.
Amgen breaks out
Even with top-drawer underwriters, the company received limited
analyst coverage, because the market for biotech stocks crashed after its IPO.
"Smith Barney gave us minimal coverage and their attitude was there's no sense
standing in front of a dam when it's breaking," said Philip Whitcome, now president
and CEO of Neurogen Corp., who was then director of strategic planning at AMGN.
AMGN was able to break out in 1986 by the convergence of a
set of internal and external factors: it had met its milestones of filing INDs
on five products by the end of 1995 and data on EPO started coming in; the company
had formed two corporate alliances; enthusiasm about progress being made by
other biotech products, such as t-PA and IL-2, helped rejuvenate the market;
and a new group of analysts had come in as the company was gaining momentum.
Companies today face a tougher environment. Analysts in the
late '80s were hungry for new companies to cover. Now, analysts can't even cover
all the companies their firms have brought public, and the product failures
of the past year have made them far more conservative in their stock picks.