12:00 AM
Mar 17, 2003
 |  BioCentury  |  Finance

Ebb & Flow

Last Friday was the third anniversary of the popping of the genomics bubble, and biotech valuations continue to drift down. Although the drop is no longer precipitous, the BioCentury 100 index is testing whether it wants to set up shop beneath the 900-point level.

The index did fall through the 900 floor on Monday, losing 1.3% to 890 on the day. It was the first time the index had fallen below 900 since the week ended Oct. 30, 1998, when it settled at 844.

The index dipped another 1% to 881 on Tuesday before gaining traction to close the week up 0.8% at 909.

A further retreat would prompt technicians to look to revisit the floor of the prior bear market. The bad news: that floor was more than 200 points below current levels at 692, hit on Sept. 4, 1998.

Pacific Growth banker George Milstein pointed out that the geopolitical situation has investors sitting on their hands. "It's a big overhang and people just aren't willing to part with their money." He suggested there could be a small rally in the overall market once the war overhang is removed, but it would not be biotech-specific.

Looking for a silver lining, Damian Lamb of Genesys Capital noted that biotech continues to compete well for private capital. "The good news is that biotech is still high on the list from a limited's standpoint. Five years ago it was telcom, tech, and software, and biotech was way down on the list."

If anyone needs reminding, the genomics bubble was burst by comments by then President Bill Clinton and U.K. Prime Minister Tony Blair regarding the patentability of the human genome (see BioCentury, March 20, 2000).

Follow-on march continues

About the only bright spot in this otherwise dismal market is that later-stage product companies continue to tap follow-on money. The Medicines Co. (MDCO) and Inspire (ISPH) raised $85.8 million and $67.5 million, respectively, in two bumped up offerings that priced on Friday.

ISPH's deal only took three days to price, and the company ended up selling 1 million more shares than it had proposed last Tuesday. It sold 5 million shares at $13.50, only $0.56 below its $14.06 price prior to filing. Deutsche Bank and U.S. Bancorp Piper Jaffray underwrote the deal. ISPH's INS37217 intranasal P2Y2 agonist spray is in Phase III testing to treat perennial allergic rhinitis (PAR).

MDCO increased its deal by 900,000 shares, selling 4.9 million shares at $17.50, $1.22 below its price prior to filing on March 5. Look for MDCO to use the proceeds for marketing and additional clinical development of Angiomax bivalirudin, which is approved as an anticoagulant during angioplasty and is in development for use in open vascular surgeries. The deal was underwritten by Morgan Stanley; Bear, Stearns; and CIBC.

Plug pulled

Anyone looking for IPO signs of life needn't look any further than the latest casualty. Control Deliverywithdrew its proposed flotation, citing market conditions. The withdrawal was basically a formality, because the red herring had gathered some dust. The company originally filed in December 2000 to raise up to $86.3 million, then amended the deal in June 2001 to sell 5.4 million shares at $13-$15. The deal was amended again in May 2002 to offer the shares at $12-$14. Underwriters were Deutsche Banc; Banc of America Securities; and SG Cowen.

Banker "right-sizing"

Finally, the dire markets continue to have an effect on banking staffs. A recent...

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