Osiris bucks trend with today's IPO

Developer of stem cell treatments gets its price in early underwriting


When the stock market opens this morning, Osiris Therapeutics Inc. will become the third Maryland biotechnology company to go public this year, and the only one to get the price it was hoping for.

It's expected to begin trading on the Nasdaq under the symbol OSIR after underwriters sold 3.5 million shares - about 13 percent of the company - for $11 apiece late yesterday. That raised $38.5 million for the Fells Point business, which uses adult stem cells to create bone- and tissue-regeneration treatments.

The amount is on target with the $11 to $13 share price company officials estimated when they announced details for the offering last month. Yesterday's sale gave Osiris a value of about $300 million and bucked an industry trend that has seen biotech companies draw less money than projected. Of the 11 other biotech companies that have gone public this year, one has reached its pricing goal - a feat no other biotech has achieved since October 2004.

But the performance of Osiris shares going forward will be closely watched by more than just the company's 83 employees and investors, given the varied ethical and political reactions to stem cell science and Wall Street's cautious attitude toward biotech businesses.

"This is an interesting story from Osiris, it's a good stem cell story they have," said Peter Winter, a spokesman for Burrill & Co., a San Francisco merchant bank that finances biotech businesses. "It's an IPO market that's really, really been tough this year ... most have had to trim expectations substantially in order to get the IPO completed."

Osiris is thought to be the closest in the country to bringing a pure stem cell product to market - years ahead of its embryonic counterparts. Already, it's selling a therapy made from donor bone that contains stem cells.

But stem cells, particularly those taken from embryos, have engendered political turmoil during the past few years as federal funding for new lines evaporated and states began debating the merits of providing public backing for the science themselves. Maryland is among a handful of states that have set aside money for stem cell research.

The regenerative ability of such cells, which are still in the early stages of being understood, is thought to be valuable in eradicating some of the world's most perplexing diseases, including Parkinson's, Alzheimer's and diabetes.

At Osiris, the adult version of the cells, which the company harvests from the bone marrow of volunteers, has shown promise in renewing damaged heart tissue and regenerating bone.

Embryonic stem cells may have the potential to become any kind of cell, according to the National Institutes of Health, and could have a variety of uses. But they're also controversial given their origins, raising ethical, right-to-life questions. Last month, President Bush vetoed legislation that would have widened federal funding possibilities for research into the cells.

Despite their differences, both types of cells tend to be lumped together on Wall Street.

"The market should look at the two technologies differently, one is a little bit more advanced and already in the clinic," said Ren J. Benjamin, a biotechnology analyst with Rodman & Renshaw LLC., a New York investment bank.

"However, from following these companies, [I've learned] they tend to move in a group," Benjamin said. "And so, if there is news being generated on Capitol Hill about embryonic stem cells, all the stem cell companies benefit. At the same time, if someone's committed fraud in South Korea, then all the stem cell companies go down."

Biotech businesses in general have been a tough sell in recent years, Benjamin said. It takes hundreds of millions of dollars and years of development to bring a new drug to market, and many in the stock market want more immediate results.

About the same time the dot-com industry was experiencing a bubble, so were the life sciences, buoyed by investor enthusiasm in public and private efforts to map the human genome. But after it became clear that such data wasn't immediately translatable into dollars, the money began to dry up, as did the desire for public biotech companies.

That's begun to turn around during the past couple of years, with more biotechs successfully going public. But for the most part, they've done so at lower valuations than they would have liked.

Both of the Maryland biotech companies that began selling public stock earlier this year have lost ground from their initial share price.

Vanda Pharmaceuticals, a Rockville company developing drugs for central nervous system disorders, expected to go public with shares priced between $12 and $14, but opened at $10 a share April 12 and finished the day at $9.68. Yesterday, the stock closed at $9.16 on the Nasdaq.

Iomai Corp., a Gaithersburg vaccine maker, was looking for $11 to $13 a share when it went public Feb. 1, but its underwriters instead priced the stock at $7. The company finished that day at $6.80 and closed yesterday at $3.81.

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