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Make Way for the Proteomics Roadshow

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By Meredith Salisbury

Get ready for the next round of IPOs! OK, so Tom Abate’s new book on investing in biotech doesn’t suggest that an IPO flurry is coming any second, but he predicts that there will be one — eventually.

The Biotech Investor: How to Profit From the Coming Boom in Biotechnology, published in February 2003, may seem a tad optimistic to those who remember the heady boom periods (and the subsequent downturns) prompted in large part by enthusiasm for the Human Genome Project. But in spite of his book’s title, Abate, a journalist with the San Francisco Chronicle, remains down-to-earth. He cautions about what he says will be the next wave of IPOs — proteomics companies — by reminding readers about the genomics IPO craze. Looking at stock-price data for various genomics companies from May 2002 compared with the opening price of the stock when it went public, he determined that investors in the biotech IPOs of 2000 “stood a 90 percent chance of losing money.”

He also uses data from Versant Ventures to show why IPO season is so hectic: in the past 20 years, IPO windows have generally lasted about 10 months, never more than 15. The between-times droughts of venture and other investment capital, on the other hand, tend to last for three or more years. Small wonder that even companies that aren’t ready for an IPO flock to the marketplace when the season hits — and, promising though they might have looked, find themselves getting booted off the Nasdaq just a year or two later.

IPO season may still be months or even years away. But provided that proteomics companies survive that long, now’s the time to start checking them out, whether you’re an investor or a company on the prowl for a smart acquisition. The rules are the same as always: check cash on hand, profitability, how far along the pipeline the research and tools are, and whether there are therapeutics or diagnostics in the offing.

With any luck, more than 10 percent of the proteomics IPOs will make a profit — or at least you’ll have been wise enough to choose the 10 percent that turn out to be winners.

 

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