Outlook for Healthcare IPO Market in 2009
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Transcript of Outlook for Healthcare IPO Market in 2009
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IPOs Have Hit Skids; Health IPOs More So IPOS DECEMBER 14, 2008, 10:03 P.M. ET
By LYNN COWAN
The only thing that could possibly have been worse than trying to come public in
this year's rough market was trying to launch a health care-related IPO.
So far this year, there have been three new stocks that focus on medical devices,
pharmaceutical or biotech needs in the U.S., compared with 38 during the same
period in 2007, according to data from Dealogic. That's a decline of 92%,
compared with an overall decline of 86% for all initial public offerings of shares.
The IPOs of all three -- MAKO Surgical Corp., Bioheart Inc. and CardioNet Inc. --
managed to get done in the first quarter; there hasn't been a health-care IPO
completed since March.
Most companies that came public this year are trading below their initial public
offering prices; of the three health-care issues, only CardioNet closed Friday
above its IPO price.
"It's very troubling," says Steve Brozak, a biotech and medical-devices analyst
who is president of WBB Securities LLC. "These companies were like the farm
team for large pharmaceutical makers to buy novel technology and drug
discoveries."
New health-care-related companies haven't been embraced by investors even
when the IPO market was healthy in recent years. Although they swarmed over
the IPO calendars like ants at a picnic -- they outnumbered the pace of deals in
all other industries in 2004, 2005 and 2006 and came in a close second to
technology stocks in 2007, according to data from Renaissance Capital's
IPOHome.com Web site -- they often required at least one price-range reduction
in order to get completed. Even then, the stocks typically would sink on the first
day of trading.
That didn't change in 2008. All three health-care deals were priced below their
original ranges and traded below their IPO prices on their first days. But at least
they were completed, no easy feat this year.
In the six months before MAKO Surgical's going public in February, there were
Page 1 of 2IPOs Have Hit Skids; Health IPOs More So - WSJ.com
12/15/2008http://online.wsj.com/article/SB122930999983405947.html
13 biotech, pharmaceutical and medical-instrument deals that were withdrawn
from the market, and another 24 have been yanked since then, according to
Dealogic.
MAKO Chief Executive Maurice R. Ferré says he believes the company was able
to go public because it got done before the environment considerably worsened
and because there was strong interest in his firm's robotic instruments for knee
surgery.
"We faced a huge amount of headwind going into the deal," says Mr. Ferré, who
adds that he has since been "swamped" by calls from other health-care executives
asking how MAKO completed its IPO.
Market observers say there isn't much that is encouraging about the IPO
prospects in the new year for private health-care-related companies. The sector is
full of risk from a technology and regulatory standpoint, and young companies'
enormous need for capital adds another layer of undesirable risk, says Sergio
Garcia, a partner at the law firm of Reed Smith LLP who specializes in biotech
and bio-pharma transactions.
Mr. Garcia says: "No one is projecting a turnaround any time soon."
Write to Lynn Cowan at [email protected]
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Page 2 of 2IPOs Have Hit Skids; Health IPOs More So - WSJ.com
12/15/2008http://online.wsj.com/article/SB122930999983405947.html