Stock glut will keep buyers on top in '94
Although the offerings window for biotech stocks creaked open in the fourth quarter of 1993, the renewed ability of a select group of companies to raise money hasn't changed the underlying fundamentals of the industry's capital problem: the need for capital, and hence the supply of stock, exceeds the demand from investors.
"The industry faces a very challenging conundrum," said Fred Frank, senior managing director at Lehman Brothers. "As they move out of the research cycle into the development cycle, companies' needs for capital are rising as capital is being rationed - so the supply will continue to overwhelm demand."
The result will be a continued buyer's market for stock offerings, which in 1993 was reflected in the fact that 12 of the 34 initial public offerings were completed below their proposed price ranges, and in a record number of private placements at average discounts of 15-20 percent.
Frank predicted that the 1994 market will look much the same, including the private placements that were popular in the latter half of the year. "That means lower dollar volumes of financings - $10-$20 million. Companies will