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IPO Step-Ups By Therapeutic Area: Is Your Disease Focus Hot or Not?

 
• By Chris Morrison

Valuation Watch: an analysis of pre-money step ups for the 2003-04 biotech IPO window demonstrates that public investors are favoring companies in some therapeutic areas over companies in other areas. CNS and jump-start technologies, for example, are doing well.

The average pre-money IPO step up for US biotech companies that have hit the public markets in this last financing window is 2.11. We've pointed out in this space that biotech investors are saving their money for companies with Phase III products—the only development stage which peaks above this modest average, at 2.60 (see "Biotech Investors: Believing the Dream, Rewarding Phase III IPOs," START-UP, November 2004 Also see "Biotech Investors: Believing the Dream, Rewarding Phase III IPOs" - Scrip, 1 November, 2004.).

But not all Phase III products are alike, and an analysis of these same companies suggests that investors prefer certain therapeutic areas over others. (See Exhibit 1.) We've omitted categories with fewer than three companies; thus ophthalmology-focused Eyetech Pharmaceuticals Inc. 's early 2004 IPO (step up of 3.70) [See Deal] is excluded, as are several other above-average firms such as Barrier Therapeutics Inc. (dermatology, 2

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