Healthcare initial public offerings enjoyed a sharp uptick in the first quarter, nearly matching their total activity in 1998 and 1999 combined.
Healthcare firms raised $1.1 billion in 11 venture-capital-backed IPOs during the quarter ended March 31, according to VentureOne Corp., a San Francisco-based venture capital research firm.
The quarter was a strong one for public offerings overall, making it the fifth consecutive record-breaking quarter, the company says. The number of IPOs in all industries tripled compared with the first quarter of 1999, with the amount raised increasing more than fourfold from the quarter a year ago.
But healthcare was the "big surprise" of the quarter, VentureOne says, with the total number of deals and amount raised just shy of the totals for 1998 and 1999 combined, when 26 healthcare companies entered the public markets.
Allos Therapeutics, a Denver-based company that makes an injectable drug for use as an adjunct to radiation therapy for brain cancer, timed its IPO to capital needs, not the market, says Chief Financial Officer Mike Hart. He says the company had been through three rounds of venture-capital financing and needed a major boost in capital to fund its move through the third phase of the Food and Drug Administration approval process and beyond.
Its timing was fortunate, given the low values at which biotechnology stocks had traded a few months earlier. "We probably raised twice what we would have six months ago," Hart says.
Landacorp, an Atlanta-based developer of healthcare management software, was more calculating. It postponed its offering after a market downturn in early November 1999 and waited until after the holidays for its IPO, which occurred Feb. 8, says Steve Kay, the company's chief operating officer and CFO.
"It's been a long time coming, and the companies that had been waiting (to go public) were really good companies," says VentureOne spokeswoman Tamar Zemel.
But the window of opportunity may have already slammed shut for some companies, given the stock market's volatility in April.
As of last week, six of the 11 healthcare companies that went public during the first quarter were trading at significantly lower values than their IPO prices. That included Landacorp, which traded at about half its IPO price of $10. "The whole (healthcare) sector was taken down," Kay says.