Biotech Acquisitions Up, IPO's Down

    By Donald Zuhn

An article at BusinessWeek.com ("Biotech IPO's Iffy Prognosis") attributes a recent drop in initial public offerings (IPO's) for small biotech companies to the reluctance of investors to forgo big paydays as small biotechs use much of the cash raised from such offerings on drug development.  However, while the biotech IPO environment has become more cautious, the environment for biotech acquisitions has blossomed.  According to author Alex Halperin, the reason for this reversal of fortune is simple:  larger pharmaceutical companies have been more than willing to assume the risk associated with drug development and approval, and view the acquisition of newer biotech companies as an effective way to "outscource" their research.

In comparing two upcoming biotech IPO's for OncoGeneX and Rosetta Genomics with Merck's recent acquisitions of GlycoFi and Sirna Therapeutics and GlaxoSmithKline's purchase of Domantis, Halperin finds little in the IPO offerings to get enthused about.  Of course, the author's perception is likely colored by his characterization of OncoGeneX and Rosetta Genomics as "money-losing companies without an established product."  Ultimately, Halperin views acquisition as the more compelling alternative for small biotechs in the current business climate.