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Biotech IPOs get a boost
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July 18, 2000: 6:59 p.m. ET
Gains by Decode Genetics and Transgenomic signal rebirth of sector
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NEW YORK (CNNfn) - Two biotechnology companies produced strong debuts in their market debuts Tuesday, giving a glimmer of hope to an industry that has been largely shut out of the new issues market for several months now.
Decode Genetics Inc., which develops technology that allows health care companies to compile genomics data, climbed 41 percent on its first day of trading Tuesday, while research tool developer Transgenomic Inc. jumped 60 percent.
Biotech IPOs, on the rise during the first quarter of 2000, crashed after the technology sell-off in April and never recovered. Analysts believe Tuesday's strong performance could signal a turning point.
"This is the rebirth of biotechs as it relates to IPOs," said David Menlow, president of IPOfinancia.com. "These are the first two [genomic-related] stocks out of the gate."
Both DeCode and Transgenomic benefited from the perception that biotechs are finally going to produce actual results from the recent successes in gene mapping research, analysts said. On June 26, Celera Genomics and the Human Genome Project completed the first draft sequence of the human genome. The genome is the total DNA content of an organism.
However, it may be years before biotechs are able to actually produce a product, Menlow said.
"The timeline isn't going to be suitable for most IPOs investors, which is why biotech are the biggest roller coaster ride," he said. "These things take too long."
Gene mapping
DeCode Genetics Inc. finished its first day at 25-7/16, up 7-7/16. The company raised $172.8 million late Monday after pricing 9.6 million shares at $18 each, the top of the range, through underwriters led by Morgan Stanley Dean Witter. The company also increased the size of the deal to 9.6 million shares from 8 million Monday.
The Reykjavik, Iceland-based company develops products and services for the health care industry. Decode Genetics Inc. (DCGN: Research, Estimates) is involved in the search for specific genes that cause or indicate disease, and so far has identified 12 specific candidate genes but has not validated any disease genes.
The four-year-old company is studying the population of Iceland to discover the function of genes and their relation to diseases. The country's population is ideal because of the lack of immigration to the island and because it is small enough that the total genome of Icelanders is less varied than larger, less-isolated nations, the company said.
After the IPO, Sapac Corp. will hold a 10.7 percent stake, entities affiliated with Alta Partner will own 5.6 percent, entities affiliated with Atlas Ventures will have 5.6 percent, and entities affiliated with Polaris Venture Partners will hold 4.5 percent.
Human genetic code
Transgenomic rose 9 to close at 24 Tuesday, one day after raising $67.2 million by pricing 4.48 million shares at $15 each, above its expected range. Chase H&Q served as lead underwriters on the deal.
The Omaha, Neb.-based company provides research tools for the genomic sector that let researchers discover and understand variations in human genetic code.
Transgenomic's (TBIO: Research, Estimates) WAVE System lets users analyze known and unknown genetic mutations faster, more accurately and more cheaply than commercial methods, the company said in an SEC filing.
Since August 1997, the company has sold about 300 WAVE Systems to customers including Harvard University, Stanford University, Baylor College of Medicine, University of Chicago, National Cancer Institute, Mayo Clinic, Merck & Co., and Eli Lilly and Co.
After the IPO, Transgenomic CEO Colin D'Silva will hold a 28.3 percent stake, company founder Stephen Dwyer will own 17.2 percent, and Transgenomic Chief Financial Officer Douglas Gjerde will have 13.3 percent.
Daum postpones
Daum Communications Corp. postponed its planned IPO due to market conditions, underwriters said. Seoul, South Korea-based Daum Communications had planned to offer 10 million American depositary receipts (ADRs) at $17.88 each through underwriters led by Credit Suisse First Boston.
Daum operates a Korean language portal Web-site, www.daum.net, that lets Korean speakers communicate, conduct commerce and obtain content. Daum had planned to trade under the symbol DAUM. 
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