Ebb & Flow

The new rules separating investment banking and sellside analysis don't seem to have affected research coverage. Analysts at the banks that took the recent class of biotech IPOs public have not only delivered on coverage, they're also largely bullish.

All but two syndicate banks - Citigroup with CancerVax (CNVX) and Thomas Weisel with Acusphere (ACUS) - have picked up coverage of their recent IPO clients. Of the 23 ratings, 11 are "strong buy," 10 are "buy" and 2 are "hold" (see "Research Delivered").

Rising tide

Many of last fall's IPOs quickly broke issue and were left for dead. But the warm reception for the Class of 2004 is lifting the valuations of the 2003 deals, which have added $395.3 million in aggregate market cap since the beginning of the year (see "Catching On," A14). Several factors have likely contributed to the updraft, including the continued uptick in biotech valuations. And many fund managers, sitting on profits last year, were unwilling to put a new name in their portfolios until the new year.

Among last week's IPOs, Corgentech (CGTK) priced a bumped up offering on Wednesday night. After pricing 6 million shares at $16, the high end of its proposed range, CGTK soared $5.40 (34%) to $21.40 on 6 million shares on Thursday. It cooled somewhat on Friday to close at $19.25, but it was still valued at more than a half a billion ($502.4 million).

The company's lead product, E2F Decoy, is in Phase III testing to prevent vein graft failure following coronary artery bypass graft (CABG) and peripheral artery bypass graft surgery. E2F Decoy is partnered with Bristol-Myers(BMY).


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