VC-Backed Biotech IPOs Hard to Find in 2001 –

Last year’s biotech boom has fizzled into a mere puff going in to the third quarter of 2001. However, deals are still getting done and fresh biotech plays are still trying to make a push toward the public market.

This year, only three venture-backed initial public offerings were completed, netting $190.6 million, according to our VentureXpert database. In 2000, a total of 36 VC-backed biotech companies went public, totaling $3.2 billion in proceeds.

The largest VC-backed IPO so far this year has been from Wright Medical Group Inc. (NNM:WMGI), which went public July 12 and raised $93.8 million. The Arlington, Tenn.-based maker of reconstructive orthopedic devices was backed by Warburg Pincus. Wright Medical priced 7.5 million shares at $12.50, and the stock has since jumped 28% to $16.00 by late Wednesday afternoon.Third Wave Technologies (NNM:TWTI) and Seattle Genetics Inc. (NNM:SGEN) were the other two VC-backed biotech companies this year to go public. They raised $47.9 million and $49 million, respectively.

By contrast, last year’s largest deal was from Lexicon Genetics Inc. (NNM:LEXG), which raised $220 million in its April 7, 2000 initial public offering. The gene and cell database company priced at $22.00 and is now trading at $9.02, a drop of 59%. The smallest offering last year was from microfluidic systems maker Cepheid (NNM:CPHD), which raised $30 million last June. After pricing 5 million shares at $6.00, the company has plummeted 55.8% to $2.65.

In the Works

There are still six VC-backed deals worth approximately $486.3 million in the pipeline waiting for the right time to go public. Last week, the newest entrant, biotechnological pesticide manufacturer AgraQuest Inc. (Proposed NNM:AGRQ), filed with the SEC for a $75 million IPO.

Agraquest, which has selected Merill Lynch to lead manage the deal and Stephens Inc. and First Union Securities to serve as underwriters, last received financing in December of 2000. The $15 million late stage round included such backers as BioAsia Investments LLC, Burrill & Co. and Rockefeller & Co., along with some undisclosed investors.

The Davis, Calif.-based manufacturer of environmentally-friendly natural pest control products plans to use proceeds from the IPO for expanding its sales and marketing capabilities, research and development activities and to enhance its manufacturing facilities. It also plans to use $5 million to repay a promissory note.

The company did not see revenue until the end of 2000, which caused it to incur a net loss of $9.08 million, compared with a net loss of $6.08 in 1999. The company’s first product, named Serenade, has been approved for use on grapes, apples, pears, cherries, tomatoes, hops, several vegetables, peanuts and walnuts.

With agriculture-based biotech companies coming under fire from various global constituencies, the demand for genetically engineered crops is waning, with emphasis being placed on organically produced food products. “We feel the heyday of ag-iotech has peaked and it’s going to be a downhill ride for them now because no new countries are moving to produce genetically engineered crops,” said Ronnie Cummins, the national director of the Organic Consumers Association, a Minnesota-based consumer group. “There are more and more new stories about the boom in organic products.”

AgraQuest, however, argues that it is on an upswing as a formulation of Serenade has been approved for use in organic agriculture. “As concerns over the effects of synthetic chemical pesticides and genetically modified crops continue to grow, we believe our products will be increasingly adopted into the integrated pest management programs of conventional and organic growers as well as by institutional and home users. We believe we will set the industry standard for natural pest management solutions,” the company’s S-1 stated.

The company, which has 19 patents and two U.S. patent applications pending, has strategic collaborations with Agroscience LLC, Maxygen Inc. and American Home Products Corp. and competes directly with the pesticide units of Valent Bioscience Corp., EDEN Bioscience Corp. (NNM:EDEN) and Certis USA Inc.While AgraQuest may be the most recent VC-backed biotech company to queue up, the largest deals waiting to go public are two $100 million deals from diaDexus Inc. (Proposed NNM: DDXS) and CombiMatrix Corp. (Proposed NNM:CMBX), both of which filed in late 2000.

Frank Musero is an associate editor with The IPO Reporter. He can be contacted at: