Ebb & Flow

Anyone needing another example of the measured approach that IPO investors are taking needn't look much farther than the pricing of two underwritten deals last week: one an IPO and the other a follow-on. While no one expects parity between a new company and one that's established in the market, the two deals provide a striking illustration of how the market is valuing new entrants.

The company raised $60 million through the sale of 6 million shares at $10, which was $2-$4 below the proposed range of $12-$14. Had AVNC sold the shares at the top of that range, it would have raised $84 million and had a post-money valuation of $317.7 million.

Two days earlier, ZymoGenetics (ZGEN) - which has two products in Phase I trials - priced its follow-on at a post-money valuation of $652.5 million. Subtracting its $328.1 million in cash puts its technology value at $324.4 million.

The company 's Factor XIII is being developed for bleeding disorders and its TACI-Ig is being developed for autoimmune diseases. It's worth noting that ZGEN expects to double its clinical pipeline by mid-2004. It expects to start Phase I trials of its recombinant human thrombin as a topical hemostat this year, and Phase I trials of its IL-21 compound in cancer in the first half of 2004.

Investors continue to be willing to pay a premium for ZGEN's pedigree. The company was spun out of Novo Nordisk (NVO) in 2000 and lays claim to helping discover or develop five recombinant protein-based therapeutics that had combined 2002 sales of more than $2 billion. ZGEN's post-money valuation at its January 2002 IPO was $547.2 million, and it had yet to enter the clinic. Its technology value at the time was about $237 million.

In contrast, AVNC has a relatively low profile. It has issued only one press release with preclinical data since changing its name from