Anthera IPO: Second Biotech to Price Low, but Price Isn't Everything

Last Updated Mar 2, 2010 7:36 AM EST

Anthera Ironwood IPO haircutAnthera Pharmaceuticals (ANTH) became the second biotech to make it out the current IPO window and the second biotech to take a haircut on its price -- but that might not be as bad as it sounds.

I wrote last month about how Ironwood Pharmaceuticals' (IRWD) IPO was good news for biotech, despite the fact that the $11.25 per share price fell short of the $14 to $16 target range. The $188 million take was still bigger than any biotech since Ribapharm's $260 million offering in 2002 (not counting Talecris (TLCR), which actually makes money and thus is arguably not biotech).

Anthera, too, priced below its range. The biotech had originally hoped to raise roughly $55 million by selling 4.6 million shares for $13 to $15 apiece; instead it got $42 million by selling 6 million for $7 each.

But here's the deal: a buy-side investor told me the "target price" for an IPO is completely irrelevant. It's a number made up by the company and its bankers. The real price is the one set by the market when the deal gets done, and it doesn't matter whether that's higher or lower than the target.

What does matter is how the stock performs in the aftermarket. Anthera held steady today, closing at $7.01. Ironwood has gained a bit in the last month, closing at $13.30 on Monday.

So nobody is bailing on these stocks yet, which might mean investors out there are at least a little interested in biotech IPOs. After all, these are both traditional, money-losing, no-products-on-the-market, expensive-clinical-trials-underway, posted-losses-since-the-day-they-were-born biotechs. Ironwood is in Phase III with a drug for constipation and irritable bowel syndrome, while Anthera is preparing for a Phase III in acute coronary syndrome.

The risk with this IPO window (as with every IPO window) is that crappy companies will force their way out and then tank. One investor called it "pissing in the well" -- and like in Southpark, when pee concentration reaches critical levels, there's trouble...

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IPO haircut photo by Flickr user c_pichler, CC.
  • Trista Morrison

    Trista Morrison is a staff writer at BioWorld Today, a daily newspaper that