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IPO Window Eases Open

Market watchers held their breath this fall, anticipating an opportune moment for initial public offerings. An IPO window was anxiously awaited as a sign that the stock market and the broader U.S. economy were once again flush with health. The life sciences, biotech in particular, were emblematic of this pained hopefulness, with more than a dozen companies scurrying to line up.

The first two biotech IPOs, for the drug-delivery company Acusphere and the specialty pharmaceutical company Advancis, failed to thrive. Each stock dipped below opening price by the end of the first day of trading, and subsequent sessions failed to stir any further signs of life. These two companies were not perceived as bellwethers for the sector, so cautious optimism continued unabated. In fact, the neurological drugmaker Renovis and the immunostimulatory company Dynavax each filed to go public a few weeks after Acusphere�s lackluster debut and around the time that Advancis was faring poorly.

At the end of October, with three biotech IPOs in one day—CancerVax, Genitope, and Myogen— investment bankers showed some savvy. All the companies priced either at the low end of their range or below and then got a mild bounce up in the next few days. Companies are anxious to take advantage of this financing opportunity in the wake of the funding drought of the last few years. But it remains to be seen if investors have the appetite, or the stomach, for biotech IPOs.

Overall, VC funding is in a holding pattern, waiting for a sign that exit strategies are plentiful again. The third quarter was slightly above the second; about $1.3 billion went to 148 life sciences companies, according to the research group Venture Economics. There were two bright spots for life sciences VC funding in the third quarter: the amount per company increased, and much of the new capital raised overall went to life sciences. Of $1.2 billion total, $800 million went to three new, sizable life sciences funds.

An average life sciences venture capital deal was $9 million in the third quarter, up from a low of $6 million late last year. The recent high for a life sciences VC deal was $13.4 million in the third quarter of 2000.

Copyright © 2003 Acumen Sciences, LLC, All Rights Reserved.

Additional charts accompanying text include:

U.S. Life Sciences Venture Capital Investment

Notable Life Sciences Deals

Historical U.S. Life Sciences Venture Capital

U.S. Biotech Industry Fund-Raising



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