Once Wide-Open Window for Initial Offerings Now Closed

Biotech mania seized investors in the third quarter as a record 29 biotech firms went public, including Ista Pharmaceuticals Inc. in Irvine.

However, the outlook for the last three months of the year is considerably dimmer, said G. Steven Burrill of Burrill & Co. in San Francisco, a merchant bank that specializes in life sciences investments.

Biotech initial offerings raised $2.4 billion, nearly four times the $688 million raised in all of 1999. Investors flocked to biotech companies in the recent quarter partly because of excitement surrounding the human genome project, Burrill said. They were also looking for the “next big thing” after largely souring on dot-coms, he said.

Ista took advantage of that window. The research and development firm raised $31.5 million by selling 3 million shares at $10.50 a share in August. The stock closed Tuesday at $11, up 6 cents a share, in Nasdaq trading.

Ista, which twice lowered its proposed offering price because of slow interest, probably wouldn’t have even gotten out of the gate in today’s environment. Market volatility, combined with growing fears about future governmental drug price controls, have spooked investors, Burrill said. “By and large, the window is mostly closed for biotech IPOs,” he said.