Oncotech Postpones Plans for Public Offering
Oncotech Inc., a fledgling firm that provides tests to help doctors decide the most effective treatment for cancer patients, has scuttled plans to go public this week because of the slumping stock market, the company’s underwriters said Wednesday.
Gregory Presson, vice president of corporate finance at Newport Beach-based Cruttenden & Co., said the company decided to indefinitely postpone its initial public offering and explore other means of raising funds.
“The market is highly unreceptive with lots of uncertainties at this point such as the Middle East problems,” Presson said. “It’s a unique company and in a normal market it would have taken off.”
Cruttenden & Co. was co-underwriting the issue with the Dain Bosworth Inc. brokerage in Minneapolis. The public offering had been planned since May.
Oncotech was seeking to raise about $10 million by selling 1.3 million shares of common stock at a price between $7 and $9 per share.
Presson said the company is exploring alternative sources of funding, including raising $3 million to $4 million through private sources. The company, however, is still contemplating a public stock offering when the market is more receptive.
The timing of Oncotech’s offering was unusual not only because of the overall market’s recent performance, but also because the company has a short track record and has never posted a profit.
In the first six months of 1990, Oncotech lost $1 million on revenue of $700,000. The firm has lost a total of $5.4 million since its founding in 1985. The company said it expects the losses to continue through 1991 as the firm establishes a sales network and invests in research and development.
The company has a potentially huge market. More than 1 million people are diagnosed with cancer each year in the United States. But the treatments vary widely depending on the type of cancer involved. Oncotech’s technology is designed to help doctors choose the most effective treatment.
Founded by two doctors, Oncotech received start-up grants worth $150,000 from Memorial Hospital in Long Beach and the National Cancer Institute. In its first round of financing last year, the company received $1 million, including $900,000 from Los Angeles-based Southern California Ventures.
