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The Boston Globe OnlineBoston.com Boston Globe Online / Business / 2001 Globe 100

Window opened wide for biotechs

More go IPO route in 2000

By Naomi Aoki, Globe Staff, 5/22/2001


t seemed the high-tech boom was passing biotechnology by. Investors couldn't get enough of companies with dot-com in their names, but they had no use for genomics, proteomics, or any other biotech-related concern.

Then came 2000.

High-tech was out. Biotech was in. The IPO window finally opened, and biotech companies that had been waiting to go public - and even some that weren't quite ready - jumped through it.

Nationwide, a record 65 biotech companies went to market, raising an unprecedented $8 billion. That was up from 10 IPOs in 1999, raising a total of $2.4 billion. As a biotech hub, Massachusetts got its fair share of the action.

Of the 35 companies that qualified for the first time for Globe 100 consideration, nearly one-third were biotech companies. Most of them were newly public.

To qualify for The Globe 100, companies must meet a number of criteria, including being public and posting annual revenue of at least $10 million. The 35 companies new to the list were among 335 Massachusetts businesses that met those criteria.

''Biotechs definitely benefited, because the techs couldn't go public,'' said Tom Salemi, editor of Venture Capital & Health Care, a newsletter in Wellesley. ''Investors still wanted IPOs so they looked to other sectors they could believe in.''

The biotech industry had been the focus of speculative buying and wild run-ups in stock valuations in the early 1990s. But a string of disappointing drug trials and dwindling prospects for short-term profits brought the boom to an end. Burned investors avoided the sector for years.

But by 1999, new biotech products had reached the market, including treatments for rheumatoid arthritis, non-Hodgkin's lymphoma, and breast cancer. They'd also diversified their business lines, reducing risk. Investors slowly started moving back into the sector.

And what began as a steady growth in investor interest had turned into a full-scale rally by mid-2000.

Praecis Pharmaceuticals was the first of the state's biotech companies to make its public debut last year. A Cambridge company founded in 1993 to develop peptide-based drugs for various diseases, Praecis raised $80 million in April.

Charles River Laboratories, of Wilmington, was next in line, completing its public offering in June and raking in a whopping $224 million.

Then came Cambridge's Variagenics in July, raising $70 million, followed in August by Medicines Co., also of Cambridge (raising $96 million), Cambridge's Dyax (raising $60 million), and Billerica's Bruker Daltonics ($104 million).

Harvard Bioscience, of Holliston, wrapped up the year, making its initial public offering in December and raising $52 million.

The decision to go public is always based in part on how receptive the markets are, said Jim Foster, president and chief executive of Charles River Laboratories. The company, which has supplied mice and rats to labs for more than 50 years, spun itself out from Bausch & Lomb in 1999.

Foster said the company planned to raise money in the public markets to expand its business to provide a broader array of tools for drug discovery and research. But it didn't anticipate making an offering quite so quickly. This year, Charles River Labs raised another $133 million in a secondary offering.

''It was clearly an opportune time for us,'' Foster said.

By the time Harvard Bioscience was preparing for its IPO, the window was closing. The Nasdaq was losing 100 points a day. And most other companies were canceling plans for public offerings.

Founded in 1901, Harvard Bioscience had decided to step up its business of helping biotech and pharmaceutical companies address the bottlenecks in drug discovery and speed up the development process. To do that, the company needed money to make acquisitions.

''We don't depend on developing the drug,'' said its chief financial officer, Jim Warren. ''We don't take the risks. We help everybody, which makes our business stable and robust. We had a good story to tell. Companies with a good story will continue to attract investors.''

Naomi Aoki can be reached by

e-mail at naoki@globe.com.


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