Investors' ennui with biotech offerings is creating a hardier band of young companies. Executives looking toward a public offering in the next year are having to think harder about their business and clinical strategies with an eye to presenting investors with credible stories, real clinical data, meaningful corporate partnerships and evidence that they can put together sufficient funding to reach their goals.

The end result should be a stronger group of companies in the next class of initial public offerings.

While there's no magic formula for what it will take to attract investors, in general, product-oriented companies in the Class of '94-95 will have far more clinical data than IPOs in the Class of '91-92, many of which went public before they entered the clinic.

Broad platform

Even more appealing to investors may be those companies with extremely broad technology platforms capable of attracting a multitude of corporate partners. Those companies will likely be able to go public before they enter the clinic.

But whether technology platform or product-oriented, companies today are not taking it for granted that investors will buy any story with the word "biotech" in it.

"The profile is changing," said Charles Casamento, chairman, president and CEO of RiboGene Inc., which is developing translation-targeted drugs to treat viral and fungal diseases and cancer. "In 1991, Regeneron didn't even have a product in the clinic and raised $99 million on the excitement that it was a biotech company. That's just not the case any more. We have a tumor suppressor gene. In 1991, if you had one you could go public. Now people say, 'Come back in four years when you're in humans.' We're not going to ask anyone to buy a pig in a poke. Those days are over."

Of the 46 companies that went public in 1991-92, exactly half were in preclinical development or earlier and another 11were in Phase I studies. Of the nine companies that have gone public so far this year, only three haven't yet entered human trials, while two have product sales and two are in late-stage clinicals.