Companies see a window of opportunity

BIOTECH TURNS TO MARKETS

January 12, 1993|By Liz Bowie | Liz Bowie,Bloomberg Business News, company reportsStaff Writer

The long year of discontent with biotechnology companies appears to have ended as the industry, sensing a more conciliatory attitude on Wall Street, is running to the equity markets to raise cash.

In the past two months, dozens of biotechnology companies have filed with the Securities and Exchange Commission for initial or secondary public offerings. In Maryland, Univax Biologics Inc. and Genetic Therapy Inc., both in Montgomery County, have filed for secondary offerings, hoping to raise money to fund research.

Neither company has products on the market or is in desperate need of cash, but like dozens of others in the industry, they see a window of opportunity that might not be open when they need it in a year or two.

What caused the change is unclear, analysts said, but could be a combination of factors: the coming of the Clinton administration, an undervaluation of biotech stocks and some creative financings.

"A certain degree of confidence is coming back to life in the investment community," said David Webber at Alex. Brown & Sons Inc. "1992 was a poor year for biotech stocks. Investors were coming to expect disappointments."

But while their stock prices remained flat or declined, many of these companies moved closer to getting products to market and, at some point, Mr. Webber said, their values passed their stock prices.

The market might also have opened because some companies on the West Coast are finding creative ways to arrange financings. Some companies have decided, in essence, to guarantee a certain level of return for investors by putting stock in escrow that would be paid out to stockholders if the company did not perform well in the next couple of years.

Another technique, nicknamed "bio-bundling," is also being tried. That involves doing one offering of preferred stock for three or four biotechnology companies, each of which alone might not have been able to go to the market. Barron's reported recently that seven companies, including Celtrix Pharmaceuticals Inc. and Neurogen Corp., are considering this type of deal.

Finally, analysts cite the new administration as a reason for market optimism. Some forecasters have predicted that controlling health care costs might mean controlling the price of new drugs, and thus the profits of biotech companies. But many others have said that some of the new biotech drugs and diagnostic products, while expensive, would be cost-effective because they could cut the length of hospital stays or be substituted for more expensive medical procedures, said William Washecka, director of high technology at Ernst and Young in Virginia.

In addition, the incoming Clinton administration appears to be supportive of technology companies in general.

In 1991, biotechnology companies raised more than $3 billion -- as much as had been raised in the entire decade of the 1980s, according to an Ernst and Young survey. And that was followed by what some industry analysts described as a frenzy of market activity in the first few months of 1992, when nearly $2 billion was raised -- much of it in initial public offerings.

But the market's interest in biotech dropped, and only $287 million was raised in the last half of the year. Biotech stock prices plummeted as well, some by half.

Those companies that were forced to go to the market to raise capital, such as Crop Genetics International Corp., sometimes found it "painful" said Crop's chief executive, Joseph W. Kelly. When his company went to the market in July, it raised $9.3 million by selling 2.5 million shares at $4 a share -- far less than the $5.75 a share the company had hoped for.

But Mr. Webber at Alex. Brown says, "It is reasonable to argue that 1993 could be a strong turnaround for the sector."

NEW BIOTECH OFFERINGS

Some recent stock offerings for biotech companies:

If a company has no "filing date," the stock offering has already been completed. If a company has no "offer date," the offering is pending.

"Amount" is amount raised or expected to be raised. If an entry is missing, no amount has been announced.

....... ....... ....... ....... ...... ..... Filing ..... Offer

Name ...... ....... ....... ....... Amount ..... date ....... date

Target Therapeutics ..... ...... $28 million .. 11/13 ...... ---

Telios Pharmaceuticals ..... ....... --- ...... 12/11 ......

BCalgene Inc. ....... ....... ....... --- ...... 12/14 ...... ---

Isis Pharmaceuticals ....... ....... --- ...... 12/15 ...... ---

Shaman Pharmaceuticals (IPO) ... $14 million... 12/21 ...... ---

Enzon Inc. ......... ....... ....... --- ...... 12/30 ...... ---

Genetic Therapy Inc. ....... ....... --- ...... 12/30 ...... ---

Univax Biologics Inc. ...... ....... --- ....... 1/3 ....... ---

Gilead Sciences .... ...... ... $43.5 million .. --- ..... 12/23

Creative Biomolecules (IPO)..... $21 million .... --- ..... 12/92

Theratech Inc. ...... ..... .... $18 million .... --- ..... 12/92

Cell Genesys Inc. (IPO) ... .... $30 million .... --- ...... 1/4

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