CurrentOfferings.com Story:

Biotech offerings lackluster

Tara Croft, The Deal, June 22, 2004

The initial public offering market for biotechnology companies is showing no signs of improvement. Two companies � Senomyx Inc. and Momenta Pharmaceuticals Inc. � priced their IPOs on Monday, June 21, at far below original estimates. "The theme in biotech is that nothing seems to work with investors � at any price," said Tom Taulli, co-founder of Current Offerings Inc.

After having cut its price twice last week, La Jolla, Calif.-based Senomyx put its IPO of 6 million shares at $6 a share, the bottom of its most recent range. The biotech company does work for the packaged food and beverage industry � using its taste-receptor technology to develop flavors and flavor enhancers.

The company said in a statement the underwriters could buy an additional 900,000 shares to cover overallotments, meaning the company could raise as much as $41.4 million � less than half the $96 million it had noted in its original prospectus.

Cambridge, Mass.-based biotech Momenta Pharmaceuticals priced its offering at $6.50 a share. The company specializes in analyzing complex sugars in order to improve existing drugs and create new ones. In May, the company had originally set its price range between $13 and $15 a share.

Senomyx will offer 5.35 million shares and the underwriters will have an overallotment option worth 802,000 shares. The offering was originally meant to raise about $86 million. That number has been more than halved, to $40 million.

The environment for biotech IPOs is not expected to improve for at least another year. "We've had general weakness in biotech and it just makes it that much more difficult for subsequent biotechs to do well," Taulli said. "I don't see it coming back anytime soon � either later this year or early next year. It will take a while for the market to warm up to biotech offerings."

The only exception appears to be found in biotech companies that have either big pharmaceutical companies as strategic partners or products that are close to reaching the market, Taulli said.

In November, Momenta formed an alliance with generic pharmaceutical company Sandoz Inc., owned by drug giant Novartis AG, to commercialize products it develops. Momenta, however, does not yet have any products ready for commercialization.

For Senomyx, Citigroup Inc., Deutsche Bank Securities Inc., First Albany Capital Inc. and Needham & Co. will underwrite the offering. Thomas A. Coll and Steven M. Przesmicki at Cooley Godward LLP are the lawyers for Senomyx, while David C. Lopez at Cleary, Gottlieb, Steen & Hamilton is representing the underwriters.

According to the prospectus, Bay City Capital LLC of San Francisco owns 12.1% of Senomyx; Rho Capital Partners Inc. of New York, 11.1%;

Merrill Lynch Venture Partners LP of New York, 10.9%; and Prospect Venture Partners LP of Palo Alto, Calif., 10.6%. The company plans to trade on the Nasdaq under the ticker symbol SNMX.

For Momenta, SG Cowen, Banc of America Securities LLC, CIBC World Markets and ThinkEquity Partners are underwriting the offering. Momenta turned to Hale and Dorr LLP for counsel, while the underwriters used Mintz, Levin, Cohn, Ferris, Glovsky and Popeo PC. Polaris Venture Partners LP and related entities own 25.5% of Momenta, according to the filing. Atlas Venture owns another 19.2% while MVM International Life Sciences Fund No. 1 LP and related entities and individuals own 14.1%.

Momenta, which lost $2.6 million in the first quarter, said it would use the proceeds to fund the approval and commercialization of its near-term prospects. The company intends to list on the Nasdaq with the ticker MNTA.