Groupon: The IPO With More Sizzle, and Money, Than the Entire Biotech IPO Class of 2011

11/7/11Follow @xconomy

Groupon raked in so much cash through its initial public offering last week that it could buy the entire class of life sciences companies that have gone public in 2011.

For those of you who aren’t following the Groupon melodrama, the Chicago-based online daily deals site raised $700 million last week in its IPO after overcoming serious questions about its accounting practices. Groupon shrugged that off and saw its stock (NASDAQ: GRPN) boom 31 percent on the first day of trading. TV news commentators cheered, just like when social networking site LinkedIn (NYSE: LKND) went public in May.

The biotech IPO market, by comparison, has been about as exciting as the average Seattle Mariners game was this year.

Not everybody thought it would be this dull. Heading into 2011, market prognosticator Steve Burrill predicted there would be at least 25 biotech IPOs this year in the U.S. The final tally will be nowhere close to that. Renaissance Capital of Greenwich, CT, says there have been 13 healthcare IPOs this year, compared with 37 from the tech industry. Even by reaching for the loosest definition possible of the “life sciences” industry, there have been 16 life sciences IPOs so far this year, as tallied in August by The Burrill Report. But if you get rid of specialty chemical/biofuel companies, and you whittle out a Tibetan medicine company and a health IT player, that brings the group down to 10 true life sciences IPOs by my count. Six are drug developers, leaving a couple of medical device companies, a diagnostics company, and an instrument maker.

Here’s a quick rundown of the life sciences IPO class of 2011 that I put together. Three have gained value this year, two are basically treading water, and five have declined. The grand total of IPO money that went to these 10 companies is a paltry $640 million—less than a single online daily deals site raised last week. Just as worrisome, I’m almost certain that when scientific eyes look at this list, they glaze over with boredom.

Company Location Industry Ticker IPO price Closing Price Nov. 4 % change Amt Raised
Sagent Pharmaceuticals Schaumburg, IL Drugs SGNT $16 $24.01 50% $92m
Pacira Pharmaceuticals Parsippany, NJ Drugs PCRX $7 $7.71 10% $42m
Tranzyme Pharmaceuticals Durham, NC Drugs TZYM $4 $3.15 -21% $48m
Endocyte W. Lafayette, IN Drugs ECYT $6 $9.52 58% $75m
Horizon Pharmaceuticals Northbrook, IL Drugs HZNP $9 $8.80 -2.2% $49.5m
AcelRx Pharmaceuticals Redwood City, CA Drugs ACRX $5 $2.90 -42% $40m
Fluidigm S. San Francisco, CA Tools FLDM $13.50 $13.65 1.1% $75m
BG Medicine Waltham, MA Diagnostics BGMD $7 $4.89 -30.1% $35m
Tornier Amsterdam Devices TRNX $19 $19.31 1.6% $166.3m
Kips Bay Medical Minneapolis, MN Devices KIPS $8 $1.60 -80% $16.5m
Total $639.3m

It’s a sad state of affairs today that some daily deals website, which produces nothing of lasting value and will probably end up the poster child of another tech bubble gone bad, can generate so much attention and actual money.

Don’t get me wrong, I don’t think investors should just start taking fliers on unproven biotech companies. The vast majority of people who try that would surely get burned, like I’m guessing most people will get burned by Groupon.

This dynamic isn’t going to change anytime soon. The biotech VC world is in crisis, pharma companies are cutting their R&D capabilities, and the federal government is contemplating budget cuts that would put a dent in basic academic research. Hardly anybody, other than a few focused philanthropies, seems to be stepping up to invest in the risky, messy business of biomedical discovery that keeps the whole industry moving forward. Certainly IPO investors have made clear the past few years they want no part of that kind of risk.

Ironically, this same abundance of caution is coming during the same year of some major biotech home runs. There has been a string of outstanding innovation this year in life sciences from … Next Page »

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  • naostring

    When companies with flawed business models, such as Complete Genomics, float an IPO and then a secondary, only to crash afterwards, that hurts the entire sector. How can public investors navigate a highly technical sector, if they are being served $hitsandwiches, such as $Gnom… Who do they trust?

  • Oren

    They should trust the team. Reputation and credibility of the management team should be a major factor to determine wether they should invest or not. This also goes for investing in early stage companies.

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