Hope springs eternal

In a turn of events that could hardly have been imagined even a couple of months ago, some biotech bankers, VCs and companies are prepping for the return of an IPO market.

The most optimistic anticipate new S-1 filings in the next few quarters from companies with revenue, approved products and/or extremely promising Phase III data for a candidate addressing large markets, with the window cracking open around the end of 2009 or the beginning of 2010.

What has made this even thinkable is the rapid solidification of the broader markets since March and the accompanying resurgence in valuations for small- and micro-cap public biotechs, along with a spate of surprising clinical successes which in turn has stimulated an active and growing follow-on market.

In the past two IPO windows, an uptick to around $1 billion of follow-ons per quarter has preceded the opening of a market for new issues. In the last three quarters of 2008, there were only 11 follow-ons totaling $1.2 billion.

By comparison, $1.1 billion already has been raised in biotech follow-ons so far in 3Q this year. For the year, 28 follow-ons have raised $2.4 billion, with $1.9 billion of it collected since the beginning of 2Q.

A further whetting of the appetite for biotech risk in the public markets would be expected to come in stages. If an IPO window cracks open, it is likely to first be for commercial-stage, revenue-generating specialty pharmas. Making the leap of faith from market risk to regulatory and even clinical risk could come later.

An IPO window likely would need more upside surprises on clinical and regulatory news; continued large M&A and partnership deals; and performance for the broader market, as well as for IT, another high-beta sector.

Through it all, the key will be to sustain momentum through the positive performance of prior offerings. "You have

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