12:00 AM
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Apr 15, 2002
 |  BioCentury  |  Finance

Ebb & Flow

What happened to all of the window-wishers; those who would run around even in the worst of bear markets predicting that a robust IPO window is just around the corner? Even with a slate of solid IPO candidates presenting at last week's Future Leaders in the Biotech Industry conference in New York, there was hardly a peep about the "IPO window" returning.

While a curmudgeon may say it is a sign of how bad things really are on the public equity front, perhaps it's an indicator that private companies are finding the venture taps open, and thus are less concerned about an immediate opening of the window. Venture money is getting deployed at a record pace this year, even ahead even of the bubble year of 2000. In the first quarter alone, private biotech companies raised $840 million worldwide, more than the $731 million raised in the first quarter of 2000, and the $773 million raised in the first quarter of 2001.

Well-fed companies also could lead to a new phenomenon: longer troughs between IPO windows. More and more, private companies are telling Ebb & Flow that they are in the catbird seat in terms of choosing when they want to do an IPO, rather than having their balance sheets choose for them.

Although it is impossible to draw hard conclusions from two data points, there were 34 months between the end of the '91-'92 IPO window and the start of the '95-'96 window. The '99-'00 IPO window didn't crack open for another 38 months.

Each window lasted about one year; however, the '99-'00 window differentiated itself as companies raised more than three times that of the prior two windows - $97.2 million on average - and commanded nearly a four-fold increase in valuation - $422 million on average (see BioCentury, April 16, 2001).

Hot names

If there's any appetite for new paper, a packed room at Future Leaders boded well for Cytokinetics. Market watchers have tipped the company as a top IPO candidate because of its approach to cancer therapy.

Last week, the company and partner GlaxoSmithKline (GSK; LSE:GSK) presented seven abstracts at the American Association for Cancer Research (AACR) meeting, showing that its mitotic kinesin protein compounds demonstrated activity against cancers of the colon, ovary, lung and pancreas, without side effects associated with paclitaxel (see Technology Briefing, A16).The companies intend to file an IND for one of the compounds this year.

Cytokinetics will need a receptive market to support the $203 million post-money valuation it had following its $14 million series D round taken up by GSK last June. Cytokinetics raised $55 million November 2000 and has raised $94.3 million since its inception in 1998.

The valuation doesn't seem to be scaring away the banks: Cytokinetics's audience had an extremely high banking barometer. Following the presentation, one audience member likened the flood of bankers and analysts to the podium to a full-court press.

Conference scuttlebutt also had Achillion, a developer of small molecule antivirals, as a possible IPO filer later this year. Achillion also can afford to wait. The company has raised $65 million since August of 1998, $41 million of that coming in its series C round in January.

But there was not a peep about IPO filings in the presentations of two other strong candidates: in-licensor Pharmion and ophthalmic play Eyetech. Pharmion President and CEO Patrick Mahaffy reminded the audience that his company has raised $90 million to date, of which it still has $68 million.

Eyetech hasn't wasted any time spending the $108.5 million it banked in its July 2001 venture round, ending the year with $59 million in cash. It is running pivotal Phase II/III trials of its EYE001 anti-VEGF aptamer in age-related macular degeneration (AMD). The product is not partnered, and thus Eyetech is bearing the full cost of the trial. CEO David Guyer told the Future Leaders audience that the company hopes to complete enrollment by year end.

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