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Biotech IPOs Face Dismal Market: Osiris Therapeutics Scales Back Expectations

Strategic Insights

— 2 min read

The biotech industry's initial public offerings (IPOs) have seen a lackluster performance this year, leading Osiris Therapeutics Inc. to reduce its expected revenue from its pending IPO. The Baltimore-based company originally aimed to raise $80 million but now expects to trade in the $11 to $13 range for 3.5 million shares. This decision reflects the downward trend of biotech IPOs this year, with almost all companies coming in below their pre-filing price ranges, averaging a 30% decrease.

Key Takeaways:

  • Osiris Therapeutics Inc. reduced its expected IPO revenue from $80 million to $45.5 million to $46.5 million ($11 to $13 range for 3.5 million shares).
  • The company's decision was likely influenced by the poor performance of biotech IPOs this year, with all nearly a dozen companies coming in below their pre-filing price ranges by an average of 30%.
  • The Maryland Venture Fund's director, Elizabeth Good, attributed this trend to the biotech industry's usual pattern of high initial valuations followed by gradual price decreases.
  • Osiris Therapeutics focuses on adult stem cell research, with its lead stem cell drug candidate, Prochymal, entering Phase III human trials for the treatment of Graft vs. Host Disease.
  • The company reported a $20 million net loss at the end of 2005 and a $5 million net loss for the first quarter of 2006.
  • The original underwriters, Deutsche Bank Securities, Jefferies & Co., and Leerink Swann & Co., were replaced by Lazard Capital Markets due to concerns over the minimum price being too high given the current market conditions.
  • Recent Maryland biotech companies, Iomai Corp. and Vanda Pharmaceuticals Inc., Both went public this year, but failed to meet their target prices, raising concerns about the biotech industry's IPO market.

Statistics:

  • Osiris Therapeutics Inc.'s expected IPO revenue: $11 to $13 per share for 3.5 million shares ($45.5 million to $46.5 million).
  • Average decrease in pre-filing price ranges for biotech IPOs this year: 30%.
  • Osiris Therapeutics' net losses: $20 million at the end of 2005 and $5 million for the first quarter of 2006.
  • Trading performance of recent Maryland biotech IPOs:

+ Iomai Corp. opened at $7 and closed at $3.77 (46% decrease).

+ Vanda Pharmaceuticals Inc. opened at $10 and closed at $8.80 (12% decrease).

Sources:

  • Ben Mook, "Biotech IPOs Face Dismal Market: Osiris Therapeutics Scales Back Expectations" (Date not specified).
  • Osiris Therapeutics Inc., SEC Filing (Date not specified).
  • Elizabeth Good, director of the Maryland Venture Fund (Date not specified).
  • Iomai Corp. and Vanda Pharmaceuticals Inc. SEC Filings (Dates not specified).

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