CurrentOfferings.com Story:

Peninsula delays IPO

By Andrew Morse, The Deal, March 10, 2004

The indefinite delay of an expected pharmaceutical IPO and the lukewarm reception of a highly anticipated Chinese technology company have raised concerns that a receptive market for new shares may be waning.

Jitters began after Alameda, Calif.-based Peninsula Pharmaceuticals Inc. indefinitely delayed its initial public offering late Tuesday, March 9, when it was expected to price. The decision was followed by tepid reception to Chinese cellphone services company TOM Online Inc., which had fallen below its offer price shortly after debuting Wednesday.

Though Peninsula said it delayed the offering in order to make further progress on some of its development projects, the move coincided with a decidedly sluggish overall stock market. On the day of the delay, the Nasdaq National Market slipped below the 2,000-point level, erasing all of its gains for the year.

A softening market could damage the prospects for a host of companies waiting to go public. Those include Seattle-based Xcyte Therapies Inc., which is expected to price this week and counts Paul Allen's Vulcan Ventures and the investment arm of Microsoft Corp. as backers, and Semiconductor Manufacturing International, a Shanghai foundry.

"The IPO market is hypersensitive to the market conditions," said Jay Ritter, a professor of finance at the University of Florida. "The resurgence of the IPO market is running into some resistance."

Biotech in particular has been a strong part of the overall IPO market, which has begun to recover after a dismal 2003. Six biotech companies have gone public this year after a one-and-a-half-year drought ended in late 2003.

The success of those deals, however, has depended largely on how advanced the biotech and its products were. Those with late-stage products and partnerships with big pharmaceutical companies, like New York-based Eyetech Pharmaceuticals Inc., had strong debuts. Others haven't been warmly received. Berkeley, Calif.-based Dynavax Technologies Corp., for example, was forced to chop its offer price almost in half in order to get the deal done.

Analysts said Peninsula's delay suggests it likely falls into the former category. Focusing on drugs to treat bacterial infections, Peninsula has no marketed products and only one in Phase 3 clinical tests, the final stage of human testing before submission to the U.S. Food and Drug Administration for approval.

"The company decided that they would like to make some progress on some of their earlier clinical programs before moving forward with the IPO," said Jeannine Medeiros, an outside press officer for the company. She added that Peninsula had raised about $60 million in financing at the end of last year and did not require additional funding at this time.

Peninsula had expected to price 5.75 million shares at between $12 and $14 per share Tuesday, which could have raised as much as $80.5 million. The deal was being underwritten by Credit Suisse First Boston with Piper Jaffray, Citigroup and First Albany Capital.

The company has no revenues. In 2003, its net loss nearly quadrupled to $17.2 million from $4.5 million the previous year, according to documents filed with the U.S. Securities and Exchange Commission.

"Look at this company. It has burgeoning losses, growing costs, no revenues," said Jeff Hirschkorn, senior analyst at Current Offerings, an IPO research boutique. "You can't succeed with that."