NEW YORK, Jan 31 – Worried that Wall Street had completely turned its back on genomics companies, some investors — and executives — may be breathing a sigh of relief after applied genomics company Exact Sciences raised $56 million in an initial public offering on Wednesday.
In appraising the IPO climate some analysts noted that since the end of December, stock prices have begun to creep up out of the cellar, giving investors and companies alike a bit more confidence.
“People are starting to make money — or at least stop losing money — on IPOs that have already gone through,” said Banc of America Securities analyst James Reddoch. “People have to have the ability to make money [for future IPOs to happen].”
But analysts said the successful IPO for Exact Sciences of Maynard, Mass., did not necessarily indicate a renewed appetite for stock in genomics businesses, many of which do not anticipate reaching profitability for several years.
Analysts attributed Exact’s ability to raise cash to its business plan, which stresses the company's short-term potential for making money off proprietary tests for detecting colorectal cancer.
“They [Exact executives] have a pretty near term, visible application for what they’re doing,” said Bill Tanner, an analyst with SG Cowen Securities in Boston. Tanner described Exact’s diagnostic products as analogous to the Pap smear, used to gauge a woman’s potential for developing cervical cancer.
Even with promising products in the pipeline, Exact raised less money than originally hoped, selling its shares for $14 each, at the low-end of the anticipated range of $14 - $16 a share.
Picks and shovels companies might find an even cooler reception if they tried to go public now, analysts cautioned.
“A lot of companies are just sitting on the sidelines, waiting for market conditions to improve,” said Paul Knight, an analyst with Thomas Weisel Partners in New York.
Companies like DoubleTwist and NetGenics have been in the IPO pipeline for months and could be there a while longer while they wait out the current downturn. NetGenics recently announced that it was slashing its workforce by 30% as the result of the company's inability to raise money in the capital markets.
But some companies are, nevertheless, preparing to jump into the IPO waters. Third Wave Technologies, a maker of DNA mutation and SNP detection assays, recently launched its roadshow and has plans to go ahead with an IPO before the middle of February.
“The bankers are convinced this is something they can do,” said a spokeswoman for Third Wave.