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IPO Market Unlocking for 'Omics-related Companies, but It's 'Anything but
Robust'
December 30, 2010
Type size:
-
+EmailPrinter-friendly versionRSS FeedBy Tony Fong
NEW YORK (GenomeWeb News) – For most of 2010, the IPO market froze out the
life science tools and 'omics market, but by the end of the summer, there
were signs that the public markets may be slowly welcoming firms operating
in the space, as a handful of public offerings ended a cold snap.
The IPO market for 'omics firms has been a grim one in recent years, and
even those that filed to go public often were forced to abandon their plans
amid a tepid response from the investment community. Companies looking to go
public still have to clear steep hurdles, and no one is saying that the
public markets are flinging open their doors to companies in the space.
When it came to raising funds, the story for 2010 was an incrementally
improving IPO market — even as private equity was active in raising large
sums of money for the 'omics space. Whether it was due to exuberance around
sequencing technology or a better economic climate, 'omics-related firms saw
a rejuvenated IPO market in the past year with most of the activity taking
place during the second half of 2010.
Among the companies that went public in 2010 were sequencing firms Pacific
Biosciences and Complete Genomics. In addition, molecular diagnostics firm
GenMark Diagnostics completed its IPO in the US in May, and Korean molecular
diagnostics company Seegene did its IPO in Korea in September.
Also, Atossa Genetics and Fluidigm have filed to go public during the past
three months, and BG Medicine's IPO continues to breathe, though a company
officially recently told GenomeWeb Daily News recently that it had failed to
price it.
Several other firms that filed before the start of 2010 to go public,
including AutoGenomics and Med BioGene, continue to bide their time.
The headliners in 2010, however, were PacBio, which raised $200 million in
its IPO, and Complete Genomics, which raised $54 million when it went public
.
In a research note last week, Peter Lawson, an analyst at investment firm
Mizuho Securities, wrote that "[r]ecent IPOs for Pacific Biosciences and
Complete Genomics have helped drive IPO activity beyond pure biotechnology
companies and into the life science and diagnostic space."
At the very least, those IPOs signaled that the public markets are not a pie
-in-the-sky dream for companies in the life science tools and 'omics spaces,
Bill Ericson, managing director at Mohr Davidow Ventures, an investor in
Pacific Biosciences, told GenomeWeb Daily News.
"When a few companies are able to go public and do so successfully, as they
have [done] in 2010, slowly the public markets become more of a viable
option," he said. "When the public markets are closed to startups, nobody
wants to be the one who goes out and fails."
The 'omics-related field has had its problems in the public markets in
recent years, and even when a company was able to gather enough investment
resources to file for an IPO, many have had to eventually pull them. Among
those that have had to abandon their IPO plans in recent years are XDx,
BioTrove, and Perlegen, which ultimately went out of business late last year
, two-and-a-half years after filing for its IPO.
Fluidigm and BG Medicine also had earlier pulled IPOs before refilling this
year.
Benefitting 'omics IPOs this year was the improvement in the general IPO
market. According to Renaissance Capital, an IPO research and investment
company, through Dec. 28, 261 IPOs have been filed this year in the US, up
129 percent from 119 for all of last year.
There were 154 IPOs priced, a 144 percent increase from 63 a year ago.
Meanwhile, total proceeds raised increased 77 percent to $38.7 billion this
year, compared to $21.9 billion in 2010, according to Renaissance.
Glass Half Empty
Still, substantial challenges remain in the IPO market, in general, and
specifically in the 'omics space. Steve Gullans, managing director of Excel
Venture Management in Boston, said that the IPO market cannot be viewed as
being completely open until companies that are years away from generating
revenues are successful in going public, "and we're nowhere near that right
now."
Ericson added that companies with any chance at going public still need to
be "very high quality."
In addition to BG Medicine, which is now evaluating its options after
failing to price its IPO, Rules-Based Medicine withdrew its IPO in November
almost a year after filing its prospectus. The Austin, Texas-based multiplex
molecular diagnostics outfit cited adverse market conditions for its
decision.
Even Complete Genomics, though it completed its public offering, had to
slice its share price to $9 when it went public from a $12 to $14 range it
had originally targeted. However, the prevailing feeling is that its current
share price is undervalued, and recently a handful of investment firms
initiated coverage on the Mountain View, Calif., shop with "Buy" or "
Outperform" ratings.
Though improvements were seen in 2010, one observer also noted that the IPO
market was hardly scintillating in the healthcare sector in general.
Companies need to finance and the IPO route is "the cheapest cost to capital
," said Gary Kurtzman, managing director for life sciences at private equity
and venture capital firm Safeguard Scientifics.
"I think it's been a year of the IPO as a renewed financing vehicle, but I'd
say the IPO market is anything but robust … for life sciences," he said. "
It's doable."
Not helping matters is that the number of funds that specifically invest in
life sciences is shrinking. There are about 60 funds that do so, "so your
universe is limited," Kurtzman said.
For 2011, he is not predicting any significant improvement in the IPO market
for 'omics firms and added that scenarios similar to Complete Genomics
slicing its original price target could repeat itself. "I think we've gotten
into a pattern where the buyers of IPOs are looking to get value and they
use the price on the cover …as guidance, and discount from there," he said.
The wariness that 'omics firms still have about the public markets can be
seen in AutoGenomics, which filed its prospectus for an IPO in mid-2008 but
still hasn't completed it. A few months ago, its CEO told GWDN that its
underwriters are still not confident that the timing is right. Looking at
companies that have gone public during the past two years, the company has
determined that they "have not done very well," Fareed Kureshy, said.
The companies with the best shots at being taken public in the coming years
are those in the next-generation sequencing space, experts said. Aside from
the general buzz surrounding the technology, investors have put a lot of
money into such firms and may be seeking a return on their investments.
Before it went public, for instance, PacBio disclosed that it had raised
about $370 million in private funding.
Next-gen sequencing "is the area of tools where I see the greatest impact
over the last year," Ericson said, "and specifically, you're beginning to
see the use of sequencing in clinical settings, including diagnostics, as
more than a very niche technology."
Private Equity Option
In addition to the public markets, a few companies were successful in
raising significant amounts through private equity in 2010. Among the larger
rounds in 2010 was a $41 million Series B by Swiss molecular diagnostics
firm Biocartis. Cellular Dynamics also received a $41 million Series B
infusion in April, and Foundation Medicine raised $25 million in a Series A
round the same month.
Despite the handful of large private financings, though, the consensus is
that private equity remains tough. In June, Joshua Phillips, managing
general partner for Catalyst Health Ventures, told GWDN, "We're actually
probably seeing the worst environment there is in venture capital."
Little has changed since then. While investments into sequencing firms
continue, interest in investing in the life science tools space is minimal.
Customers for such tools tend to be pharma and researchers, and aside from
the federal government, spending in research has not increased, said
Kurtzman.
Gullans said, though, that with the public equity markets rising, "hopefully
there should be significant money moving in" to the private equity markets.
He added that as a result there could be more funds allocated to Series A
rounds.
Robust'
December 30, 2010
Type size:
-
+EmailPrinter-friendly versionRSS FeedBy Tony Fong
NEW YORK (GenomeWeb News) – For most of 2010, the IPO market froze out the
life science tools and 'omics market, but by the end of the summer, there
were signs that the public markets may be slowly welcoming firms operating
in the space, as a handful of public offerings ended a cold snap.
The IPO market for 'omics firms has been a grim one in recent years, and
even those that filed to go public often were forced to abandon their plans
amid a tepid response from the investment community. Companies looking to go
public still have to clear steep hurdles, and no one is saying that the
public markets are flinging open their doors to companies in the space.
When it came to raising funds, the story for 2010 was an incrementally
improving IPO market — even as private equity was active in raising large
sums of money for the 'omics space. Whether it was due to exuberance around
sequencing technology or a better economic climate, 'omics-related firms saw
a rejuvenated IPO market in the past year with most of the activity taking
place during the second half of 2010.
Among the companies that went public in 2010 were sequencing firms Pacific
Biosciences and Complete Genomics. In addition, molecular diagnostics firm
GenMark Diagnostics completed its IPO in the US in May, and Korean molecular
diagnostics company Seegene did its IPO in Korea in September.
Also, Atossa Genetics and Fluidigm have filed to go public during the past
three months, and BG Medicine's IPO continues to breathe, though a company
officially recently told GenomeWeb Daily News recently that it had failed to
price it.
Several other firms that filed before the start of 2010 to go public,
including AutoGenomics and Med BioGene, continue to bide their time.
The headliners in 2010, however, were PacBio, which raised $200 million in
its IPO, and Complete Genomics, which raised $54 million when it went public
.
In a research note last week, Peter Lawson, an analyst at investment firm
Mizuho Securities, wrote that "[r]ecent IPOs for Pacific Biosciences and
Complete Genomics have helped drive IPO activity beyond pure biotechnology
companies and into the life science and diagnostic space."
At the very least, those IPOs signaled that the public markets are not a pie
-in-the-sky dream for companies in the life science tools and 'omics spaces,
Bill Ericson, managing director at Mohr Davidow Ventures, an investor in
Pacific Biosciences, told GenomeWeb Daily News.
"When a few companies are able to go public and do so successfully, as they
have [done] in 2010, slowly the public markets become more of a viable
option," he said. "When the public markets are closed to startups, nobody
wants to be the one who goes out and fails."
The 'omics-related field has had its problems in the public markets in
recent years, and even when a company was able to gather enough investment
resources to file for an IPO, many have had to eventually pull them. Among
those that have had to abandon their IPO plans in recent years are XDx,
BioTrove, and Perlegen, which ultimately went out of business late last year
, two-and-a-half years after filing for its IPO.
Fluidigm and BG Medicine also had earlier pulled IPOs before refilling this
year.
Benefitting 'omics IPOs this year was the improvement in the general IPO
market. According to Renaissance Capital, an IPO research and investment
company, through Dec. 28, 261 IPOs have been filed this year in the US, up
129 percent from 119 for all of last year.
There were 154 IPOs priced, a 144 percent increase from 63 a year ago.
Meanwhile, total proceeds raised increased 77 percent to $38.7 billion this
year, compared to $21.9 billion in 2010, according to Renaissance.
Glass Half Empty
Still, substantial challenges remain in the IPO market, in general, and
specifically in the 'omics space. Steve Gullans, managing director of Excel
Venture Management in Boston, said that the IPO market cannot be viewed as
being completely open until companies that are years away from generating
revenues are successful in going public, "and we're nowhere near that right
now."
Ericson added that companies with any chance at going public still need to
be "very high quality."
In addition to BG Medicine, which is now evaluating its options after
failing to price its IPO, Rules-Based Medicine withdrew its IPO in November
almost a year after filing its prospectus. The Austin, Texas-based multiplex
molecular diagnostics outfit cited adverse market conditions for its
decision.
Even Complete Genomics, though it completed its public offering, had to
slice its share price to $9 when it went public from a $12 to $14 range it
had originally targeted. However, the prevailing feeling is that its current
share price is undervalued, and recently a handful of investment firms
initiated coverage on the Mountain View, Calif., shop with "Buy" or "
Outperform" ratings.
Though improvements were seen in 2010, one observer also noted that the IPO
market was hardly scintillating in the healthcare sector in general.
Companies need to finance and the IPO route is "the cheapest cost to capital
," said Gary Kurtzman, managing director for life sciences at private equity
and venture capital firm Safeguard Scientifics.
"I think it's been a year of the IPO as a renewed financing vehicle, but I'd
say the IPO market is anything but robust … for life sciences," he said. "
It's doable."
Not helping matters is that the number of funds that specifically invest in
life sciences is shrinking. There are about 60 funds that do so, "so your
universe is limited," Kurtzman said.
For 2011, he is not predicting any significant improvement in the IPO market
for 'omics firms and added that scenarios similar to Complete Genomics
slicing its original price target could repeat itself. "I think we've gotten
into a pattern where the buyers of IPOs are looking to get value and they
use the price on the cover …as guidance, and discount from there," he said.
The wariness that 'omics firms still have about the public markets can be
seen in AutoGenomics, which filed its prospectus for an IPO in mid-2008 but
still hasn't completed it. A few months ago, its CEO told GWDN that its
underwriters are still not confident that the timing is right. Looking at
companies that have gone public during the past two years, the company has
determined that they "have not done very well," Fareed Kureshy, said.
The companies with the best shots at being taken public in the coming years
are those in the next-generation sequencing space, experts said. Aside from
the general buzz surrounding the technology, investors have put a lot of
money into such firms and may be seeking a return on their investments.
Before it went public, for instance, PacBio disclosed that it had raised
about $370 million in private funding.
Next-gen sequencing "is the area of tools where I see the greatest impact
over the last year," Ericson said, "and specifically, you're beginning to
see the use of sequencing in clinical settings, including diagnostics, as
more than a very niche technology."
Private Equity Option
In addition to the public markets, a few companies were successful in
raising significant amounts through private equity in 2010. Among the larger
rounds in 2010 was a $41 million Series B by Swiss molecular diagnostics
firm Biocartis. Cellular Dynamics also received a $41 million Series B
infusion in April, and Foundation Medicine raised $25 million in a Series A
round the same month.
Despite the handful of large private financings, though, the consensus is
that private equity remains tough. In June, Joshua Phillips, managing
general partner for Catalyst Health Ventures, told GWDN, "We're actually
probably seeing the worst environment there is in venture capital."
Little has changed since then. While investments into sequencing firms
continue, interest in investing in the life science tools space is minimal.
Customers for such tools tend to be pharma and researchers, and aside from
the federal government, spending in research has not increased, said
Kurtzman.
Gullans said, though, that with the public equity markets rising, "hopefully
there should be significant money moving in" to the private equity markets.
He added that as a result there could be more funds allocated to Series A
rounds.
