Biotechs ride genome project to strong IPOs
Three weeks after scientists announced a milestone the completion of the human genome project, a series of biotech companies launch initial public offerings to investor enthusiasm.
Unlike numerous e-commerce companies that have debuted to indifferent or downright negative investors, two of the biotech companies soared in early trading today. Both DeCode Genetics and Transgenomic rose more than 100 percent after increasing the number of shares sold and pricing at the top of or above their offering ranges.
"Companies specializing in making sense out of the human genome are perceived to be in great demand," said Eric Schmidt, biotechnology analyst with SG Cowen.
DeCode Genetics, an Iceland-based company that intends to sequence the country's genealogy, jumped 110 percent to $31.50 before falling to $25.44.
The company raised $173 million through the sale of 9.73 million shares, 20 percent more shares than originally intended. The shares sold at $18 each, the top of the initial $14 to $18 price range.
DeCode intends to map the genealogy of "almost all living Icelanders and most of their ancestors," according to the company's prospectus filed with the Securities and Exchange Commission. In some cases, information exists on Icelanders dating back to the ninth century. The Icelandic genome map will provide scientists with another database from which to study the links between genes and diseases.
DeCode trades on the Nasdaq under the ticker "DCGN." Morgan Stanley Dean Witter handled the sale.
Transgenomic, which manufacturers tools that can be used to separate DNA and analyze genetic variations, rose 100 percent to $30 before falling to $24. The Omaha, Neb.-based company raised approximately $67 million through the sale of 4.5 million shares at $15, $1 above the $12 to $14 price range. The company increased the number of shares sold by nearly 500,000.
Transgenomicis is among the biotechnology companies that could benefit from the human genome as more studies mandate more research equipment.
"You have the sequence, but now what are you going to do with it? That's the next step," said Peony Kao, an analyst at Renaissance IPO Fund. "Now you know what genes to target, you need to develop the compounds, you have to develop more drugs and conduct more research and studies for those drugs."
Transgenomic's customers include Harvard University, the National Institutes of Health and SmithKline Beecham. The company trades on the Nasdaq under the ticker "TBIO." Chase Hambrecht & Quist handled the sale.
A third company, Argonaut Technologies, is expected to price tonight and begin trading tomorrow. The San Carlos, Calif.-based company sells chemistry instruments and services to pharmaceutical companies.
Argonaut plans to sell 4 million shares at a range of $13 to $15. The company has applied to trade on the Nasdaq under the ticker "AGNT." Warburg Dillon Read will handle the sale.