By John E. Fitzgibbon, Jr.
Wall Street’s investment bankers are reaching across the United States borders to bring us an IPO calendar this week. There are only two companies scheduled to go public, one based in Canada and the other in Israel.
United StatesIsraelThey are OncoGenex Technologies (Canada) and Rosetta Genomics (Israel).
CanadaIsraelIf you wish to count the “blank check” companies in the IPO vineyard, then this week’s IPO traffic swells to four deals. One blank check deal is new to the calendar and the other is a carryover from last week.
And if all four deals get done, bankers hope to raise $329.5 million. Though that dollar amount is small by Wall Street’s standards, the companies going public touch on two things it’s hard to do without these days—drugs and money.
Pricing dates for the blank check companies have always been problematical. There’s a general consensus among their underwriters that every time they think they have gotten the green light from the U.S. Securities and Exchange Commission to go ahead and price the deal, the agency comes back with more questions.
That causes delays and the reason that blank check deals are listed as “the week of … ” instead of a pricing date.
Now let’s take a look at this week’s current offerings. Both are pharmaceutical companies, except one calls itself a biopharmaceutical company.
Once again, the SEC played a hand in this week’s calendar. The Canadian IPO bills itself as a “biopharmaceutical” company and the Israeli one did not identify its industrial sector. But the SEC did.
The agency classified both companies as “pharmaceutical” and assigned each the Standard Industrial Classification code number of 2834 for pharmaceutical.
Many who follow the IPO market confuse pharmaceutical companies with biotech companies. The SEC’s Standard Industrial Classification, or SIC, code for the latter sector is 2836. Pharmaceuticals deal with drugs, while biotechs deal with genes.
Nevertheless, the opening-day performances of pharmaceutical/biotech/biopharmaceuticals IPOs are lackluster. They generally underperform the market. Consider the following opening-day performances:
In 2007 (through February 23)
Bankers priced 27 IPOs, according to available reports. This figure excludes 10 unit offerings, of which nine were “blank check” deals.
Number of pharmaceutical/biotech/biopharmaceutical IPOs: 4
Closed above their initial offering prices: 2
Closed below their initial offering prices: 2
Average opening-day gain: Minus 1 percent
Number of other IPOs: 23
Closed above their initial offering prices: 21
Closed below their initial offering prices: 2
Average opening-day gain: 17.8 percent
In 2006
Bankers priced 201 IPOs. This figure excludes 39 unit offerings, of which 38 were blank check companies.
Number of pharmaceutical/biotech/biopharmaceutical IPOs: 21
Closed above their initial offering prices: 12
Closed below their initial offering prices: 6
Closed unchanged from their initial offering prices: 3
Average opening-day gain: 6.3 percent
Number of other IPOs: 180
Closed above their initial offering prices: 134
Closed below their initial offering prices: 35
Closed unchanged from their initial offering prices: 11
Average opening-day gain: 14.1 percent
This week’s two pharmaceutical/biotech/biopharmaceutical IPOs have a few things in common. Each was formed in 2000, neither has generated any revenues, and each has accumulated deficits reaching into the millions of dollars.
It should come as no surprise that the buzz from the IPO players is that neither deal is in great demand.
Inside This Week’s IPO Calendar
This week’s IPO calendar lists two deals, or four counting the blank check companies.
The blank checks: Churchill Ventures and Symmetry Holdings
Two pharmaceuticals: OncoGenex Technologies and Rosetta Genomics
All four deals are expected to raise $329.5 million.
Company Profiles
—OncoGenex Technologies is a Vancouver, Canada-based biopharmaceutical company developing new cancer therapies to address treatment resistance in cancer patients. The company had three products in development, which are designed to selectively inhibit the production of proteins that are associated with treatment resistance and are over-produced in response to a variety of cancer treatments.
The company’s aim is to disable the tumor cell’s adaptive defenses, render the tumor cells susceptible to attack with a variety of cancer therapies, including chemotherapy, and facilitate tumor cell death.
OncoGenex Technologies plans to price 4.5 million shares at $10 to $12 each to raise $49.5 million. The IPO is to start trading on Wednesday.
Formed in 2000, OncoGenex Technologies has never generated any revenues. As of September 30, it reported an accumulated deficit of $26.7 million.
OncoGenex Technologies
OncoGenex Technologies has about 25 employees.
Underwriters: RBC Capital Markets is lead manager. Acting as co-managers are Needham, Lazard Capital Markets, Canaccord Adams, and Susquehanna Financial Group
lead manager. Acting as co-managers are
Needham, Lazard Capital Markets, Canaccord Adams, and Susquehanna Financial Group
Selected Principal Shareholders: Ventures West 7 Limited Partnership, H.I.G. Horizon, Working Opportunity Fund (EVCC), BDC Capital, and Milestone Medica Corp.
—Rosetta Genomics Ltd.is a Rehovot, Israel-based development-stage company seeking to develop and commercialize new diagnostic and therapeutic products based on a recently discovered group of genes known as microRNAs.
MicroRNAs are produced using instructions encoded in DNA and are believed to play an important role in regulating protein production. The company claims to have filed patent applications potentially covering about 350 biologically validated human microRNAs and 48 biologically validated viral microRNAs. Rosetta believes it is the first commercial enterprise to focus on the emerging microRNA field.
Rosetta Genomics plans to price 3.75 million shares at $7.50 to $8.50 each to raise $30 million. That is below the 3 million shares at $11 to $13 each to raise $36 million originally filed on September 1, 2006. The IPO is to start trading on Tuesday.
Formed in 2000, Rosetta Genomics has never generated any revenues. As of September 30, it reported an accumulated deficit of $18.7 million.
Rosetta Genomics has about 37 employees.
Underwriters: C.E. Unterberg, Towbin is the lead manager. Acting as the co-manager is Oppenheimer.
lead manager. Acting as the co-manager is Oppenheimer.
Selected Principal Shareholders: Kadima Hi-Tech Ltd., Harmony 2000, Instanz Nominees Pty Ltd., and Insight Capital Ltd
52-Week Percentage Change:
Dow Jones U.S. Pharmaceutical Index: up 8.86 percent
U.S.Nasdaq Composite Index: up 10.8 percent
The “Blank Checks”
—Churchill Ventures, of Scarborough, New York, is a blank check company recently formed for the purpose of acquiring through a merger, capital stock exchange, stock purchase, asset acquisition, or other similar business combination, an operating business in the communications, media or technology industries.
The company plans to price 12.5 million units consisting of one share of common stock and one warrant at $8 each. The units are expected to trade during the week of February 26. The underwriter is Banc of America Securities.
—Symmetry Holdings, of Briarcliff Manor, New York, is a blank check company recently formed for the purpose of acquiring through a merger, capital stock exchange, stock purchase, asset acquisition, or other similar business combination, businesses in North America that are in or are suppliers to the basic industries sector, including energy and energy-related infrastructure.
The company plans to price 18.8 million units consisting of one share of common stock and one warrant at $6 each. The units are expected to trade during the week of February 26. The underwriters are CIBC World Markets, Sunrise Securities, FTN Midwest Securities, and GunnAllen Financial.