Monday, March 27, 2000
While the neon "All You Can Eat" sign remains lighted at the
Biotech Café, U.S. investors now are pushing away from the table after
one helping. The calorie counting is having a profound effect on follow-ons,
while diners continue to gorge on hot IPOs. Last week's group of underwritten
U.S. offerings - with the exception of a blockbuster IPO by Aclara (ACLA) and
a robust flotation by InterMune (ITMN) - were met with tepid investor appetites.
Indeed, the four follow-ons sold last week left as much on
the table as they tucked in their coffers. Maxygen (MAXY), Tularik (TLRK), Enzon
(ENZN) and Diacrin (DRCN) raised $334.9 million in aggregate, but left $378.7
million on the table based on their prices before filing. That excludes the
$808.8 million Roche left on the table through its secondary offering of 17.3
million shares of Genentech (DNA). Granted, Roche did raise $2.8 billion, but
it could have raised $3.6 billion had the deal gone off at DNA's $209.75 price
at filing (see BioCentury Extra, Friday March 24).
TLRK and MAXY were two of three recent IPOs looking to double-dip
the market. The third company - combinatorial materials company Symyx (SMMX)
- pulled its 1.25 million share follow-on after its stock had fallen $10.75
(19 percent) in the week it had been in registration. MAXY, which develops gene
shuffling technology, did get its 1.5 million share deal out, raising $145.5
million by selling the shares at $97. But it could have raised $260.6 million
had it sold the deal at its price prior to filing of $173.75. MAXY closed the
week at $92. TLRK sold only 1.875 million shares of a planned 3.75 million share
deal at $35.125, down from its $80 price at filing. Friday's close of $36.438
values TLRK at $1.7 billion.
Follow-ons for more seasoned companies also went off at lower prices, if they went off at all. ENZN, a developer of drugs using its drug delivery and targeting technologies, raised $102.4 million through the sale of 2.3 million shares (including 300,000 in the greenshoe) at $44.50, down $6.875 from its price at filing. ENZN traded up after the deal, closing Friday at $49.375. DCRN, which is developing cell transplantation technology for neurological disorders, sold 3 million shares at $11.50, down from its $16.75 price at filing.
Meanwhile, Aurora (ABSC) withdrew its 3.1 million-share
follow-on on Friday, after announcing on Monday that it had filed. The stock
was off $23.50 to $51.875 last Monday. ABSC, a developer of drug discovery tools,
rebounded on Friday's news, adding $4 to $55. The stock was at $75.375 prior
to the offering announcement.
"The bankers are killing this market" with too many follow-ons, said Sven Borho of OrbiMed Advisors. "I don't want to give any more money to companies that have been around since 1991 and have not come up with a product."
David Stone, long-time sellsider and now an industry consultant, said investors are as much to blame. "You can say the bankers are at fault, but the investors also are at fault because they drove the prices up," he said.