The boulevard of broken IPO dreams

Dollars may be sluicing into biotechnology via venture investments and acquisitions these days, but there’s still one place that private biotechs can’t seem to catch a break, and that’s in the public markets.

The latest casualty here is PTC Therapeutics, which on Friday withdrew an IPO it first filed over a year ago. The company blandly ascribed its request to “market conditions,” and CEO Stuart Peltz told VentureWire (subscription required) that he considers the withdrawal more of a “postponement.” Peltz added that the company’s cash is sufficient to carry it well into 2009. Its lead drug candidate, PTC124, is an experimental treatment for cystic fibrosis and Duchenne muscular dystrophy that’s now in mid-stage human trials.

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PTC, however, is far from the only biotech not feeling the love from prospective IPO investors these days. On March 1, cancer-treatment developer OncoGenex Technologies of Vancouver cut its proposed offering price by 25 percent, then withdrew its IPO filing altogether six days later. Of the four biotech IPOs that have managed to clear the gate this year (I’m omitting two Chinese companies on the Signals list, since one is a traditional-medicine manufacturer and the other makes copycat biotech drugs) three priced well below their proposed offering level — between 28 percent and 42 percent lower, that is. The fourth, Molecular Insight Pharmaceuticals, just managed to come in at the low end of its offering range. By the count of data maven Jennifer Van Brunt, twenty-one additional IPOs remain on file, with the oldest dating back just over a year ago.

Why the chilly reception? Conventional wisdom holds that investors still nurse a grudge over all the once-buoyant biotech IPOs of 1999-2000 that tanked a year or two later, and so remain wary of biotechs that haven’t proven themselves with solid mid-to-late stage data. That, of course, puts them at odds with Big Pharma, which is now throwing money at those very same unproven companies with increasing abandon. Some industry mavens have suggested that institutional investors may simply be more conservative than pharma’s M&A types, or that pharma managers may value biotech more highly than other investors because they believe in the value of “synergy” through acquisition.

Maybe so. It’s probably equally likely, though, that biotech-IPO investors are just in a funk because so few of these offerings have really taken off in recent years. If the industry keeps throwing spaghetti against the wall long enough, chances are good that a few IPOs will eventually soar — at which point, you’d best hold onto your hat as the herd stampedes back into the market. Sage advice of the day: Never stand between an IPO and a biotech investor who thinks it might be the next Genentech.