Drug Developers

Yordanka
16 Apr, 2006
New York City

Two drug discovery companies'' initial public offerings fell in their first day of trading, as investors avoided higher-risk deals. Biopharmaceutical companies Targacept and Vanda Pharmaceuticals both priced $2 below their expected ranges, and then went lower.

62 initial public offerings have been priced so far this year as of Apr 14, 2006:

- 40 IPOs are currently trading above initial offering price;
- and 20 are trading below the offering price;
- and 2 are trading at their offer price.

Three IPOs were priced during the week of April 10th, 2006. There are two deals scheduled to be priced during the coming week, hoping to raise nearly $600 million.

IPO PERFORMANCE

Targacept Inc. ((TRGT)) priced 5 million shares at $9 on Tuesday. The initial public offering was worth $45 million. This price came below the forecast of $11 - $13 per share.

Deutsche Bank Securities and Pacific Growth Equities were the lead underwriters on the deal.

All of the shares are being sold by the company. In addition, Targacept has granted to the underwriters a 30-day option to purchase up to 750,000 additional shares to cover over-allotments.

Targacept is a biopharmaceutical company based in Winston-Salem, North Carolina. It works on the design and development of a new class of drugs to treat multiple diseases of the central nervous system.

The company had originally planned to go public in February 2005, but postponed the deal, citing adverse market conditions. This time around, the company cut the number of shares to be offered by 1.25 million.

The company’s shares closed at $8.50 on Thursday, down 5.6% from the initial offering price.

Vanda Pharmaceuticals Inc. ((VNDA)) set the price of its 5.75 million–share initial public offering at $10 per share on Wednesday, below the expected range of $12 - $14 per share.

J.P.Morgan, Banc of America Securities and Thomas Weisel Partners were the underwriters of the offering.

Vanda was established in 2003 and it develops drugs to treat central nervous system disorders.

Early stage biotechs and pharmaceutical companies are not attractive for investors, who consider them high-risk because of the uncertainty surrounding drug approvals.

The company’s stock closed at $9.70 on Thursday, down 3% from the initial offering price.

IPO CALENDAR – week of April 17th

Biotech Omrix Biopharmaceuticals ((OMRI)) plans to offer 3.4 million shares within a price range of $15 - $17 per share, in a bid to raise $54.4 million. UBS Investment Bank and CIBC World Markets will lead the group of underwriters on the deal.

Oil specialist Complete Production Services ((CPX)) plans to offer 21.7 million shares within a price range of $22 - $24 a share, in a bid to raise $500 million. Credit Suisse and UBS Investment Bank will lead the group of underwriters on the deal.