The buzz is biotech — at least as far as initial public offerings are concerned in the fourth quarter.
“Despite a rather lackluster performance of the stock market these last couple of months, biotech is expecting a big fourth quarter,” said Steven Burrill, chief executive of Burrill & Co., a San Francisco merchant bank specializing in companies involved in biotechnology, pharmaceuticals and other life sciences.
“We can expect to see the first IPO take flight in mid-October and we are sticking with our prediction ... of at least a dozen IPOs getting done before the end of the year.”
Of the 50 IPO filings made during the third quarter, more than a quarter, 14, were in the biotech/pharmaceutical sector, according to the IPO site 123jump.com.
Some of the filings were delayed because of market conditions as the pharmaceutical index fell back and was down 7 percent across the board during the quarter. But now, the sector is picking up and IPOs are expected to move along quickly through the end of the year.
Acusphere , which specializes in drug delivery technology, launched Oct. 8 and on Oct. 15 pricing is expected for Advancis Pharmaceutical Corp., which is slated to bring 6 million shares to market at a range of $12 to $14.
The drugmaker said in its Securities and Exchange Commission filing that underwriters Lehman Brothers and Pacific Growth Equities have an option to buy an additional 900,000 shares.
Advancis, which is based in Gaithersburg, Maryland, said it intends to use proceeds for research and development. It will trade on the Nasdaq under the symbol “AVNC”.
The following week, another biotech company, Aderis Pharmaceuticals Inc., is scheduled to sell 6.5 million shares at a price between $11 and $13.
The Hopkinton, Massachusetts-based company said the underwriters, led by Lehman Brothers, will have the option to buy 975,000 more shares to cover over-allotments, according to the SEC filing.
Aderis, a developer of drugs to treat central nervous system, cardiovascular and inflammatory conditions, has applied to list its shares on Nasdaq under the symbol “ADPX”.
Aderis said it hoped to raise as much as $78 million from the IPO, with a significant portion of the proceeds going to research and development.
Also expected later in October are NitroMed Inc. which is offering 6 million shares for $11 to $13 each. The Bedford, Massachusetts-based pharmaceutical company has applied for a Nasdaq listing under the symbol “NTMD” with the initial public stock offering to be handled by Deutsche Bank Securities, J.P. Morgan and Pacific Growth Equities.
According to Burrill’s Biotech Index, the industry turned in a strong performance on Wall Street in July, rising 14 percent. It slipped 2 percent in August and was a fraction lower in September. However, it is up 52 percent year to date.
“Many biotech firms have seen their values increase by more than 50 percent this year, but investors broadly have held back their interest in new issues with the general market trends being less attractive,” Burrill said.
But with Food and Drug Administration approvals expected for several companies’ drugs and products, he said he believes biotech IPOs will perform well.
“In addition to the long-awaited reopening of the IPO window, it’s likely that the final quarter of the year will bring yet more product approvals, more successes in the clinic and more proof of concept ... all of which will infuse even greater value into the industry.”
In its quarterly review of the biotech industry, investment house SG Cowen noted two previous “biotech bubbles” in 1995-96 and 1999-2000.
“Biotech does hold the promise of blockbusters ... we believe that quietly, but surely, the bull has returned,” SG Cowen analysts wrote.