US biotech IPOs falter as price targets cut

The outlook for biotech IPOs dimmed further last Friday, as Senomyx cut the price of its offering for the second time in as many days and Momenta Pharmaceuticals reducing its estimated price range.

The moves followed CoTherix's decision on Thursday to pull its IPO altogether after a string of biotech IPOs struggled to price their offerings.

"Biotechs are very risky propositions for investors," said Tom Taulli, co-founder of Current Offerings, meaning investors who want to see companies with strong fundamentals are shying away from such deals.

As well, the flood of biotech-related deals this year means the supply is overwhelming the amount of demand in the marketplace for them, he said. And the deals are not being helped out by the time of year they are coming to market.

"We're also going into the summer months and that always makes it difficult to get IPOs done too," he said. "We're running against the summer doldrums."

CoTherix, which focuses on developing therapeutic products for the treatment of cardiopulmonary and other chronic diseases, said it postponed its initial public offering due to "adverse market conditions." A CoTherix company representative could not comment on if or when the company would re-enter the market with its offering.

While it may not be ideal to hold an IPO after slashing its price, it may be better than pulling it, Taulli said. "You want to avoid as much as possible cancelling the offering because the company took on a lot of expenses, a lot of time, and wound up with nothing," he said.

One health-related IPO came to market on Friday. Radiation Therapy Services, which provides radiation therapy services to cancer patients, priced its initial public offering at US$13 a share. It shares rose 3.5 per cent to $13.45 in afternoon action on the Nasdaq.

Senomyx, which makes technology to help food and beverage companies develop new food flavourings, last month proposed pricing its offering at $13-$15 per share. On Thursday, however, Senomyx slashed that range to $7-$8 per share, and on Friday it cut the estimated price to between $6-$7 per share.

Meanwhile, Momenta Pharmaceuticals, which specialises in the structural analysis and design of complex sugars for the development of drugs, cut the price for its proposed IPO to a range of $7-$9 per share from $13-$15.

BioMerieux steps up

BioMerieux, the world's eighth largest biological diagnostics company, is to set the terms for its IPO today.

The IPO would involve the sale by Wendel Investissement of 35 per cent in BioMerieux, including the 5 per cent stake the French holding company has already promised to a group of investors led by French bank CIC. Wendel has said in the past it could also opt to sell its stake to private investors.

Earlier last week, fellow European Immuno-Designed Molecules postponed its public offering due to a weak market for biotech stocks. That announcement came as a blow to the high-risk sector that had begun to revive following a three-year IPO drought in Europe.

But the industry source said that BioMerieux differed from other biotech firms.

"There's a very big difference between the two companies -- BioMerieux makes equipment based on the needs of the healthcare and medical industry, while IDM is a drugmaker," said an industry source.

Founded in 1963, BioMerieux focuses on in vitro diagnostics for clinical and industrial applications, makes equipment used in diagnosing infectious diseases and analysing food and water samples.