Two Out of Three IPOs Fail to Dazzle

The busiest week of the year for IPOs got off to a disappointing start Tuesday, as two out of three deals brought public dropped below their offering levels.

Shares of biotech GTx(GTXI) fell $1.30, or 9%, to $13.20, while auto-parts maker TRW(TRW) shed 86 cents, or 3.1%, to $27.14, in another weak sign for the new-issues market.

Roughly one in four of new deals have opened flat to down since last December, according to Thomson Financial. In Tuesday's activity, only commercial lender The Bancorp Bank(TBBK) was higher on its first day, up a strong $3.35, or 27%, to $15.85.

The overall performance, with eight other deals set to debut this week, casts doubt on the prospects for future IPOs. "It doesn't bode well for deals coming down the pike," said Sal Morreale, an analyst at Cantor Fitzgerald.

The GTx selloff follows a solid entrance last week by Eyetech Pharmaceuticals(EYET), which rose 54% on its opening day. Still, GTx has no source of revenue and has not yet been profitable, based on its prospectus filing with the Securities and Exchange Commission. GTx, which currently has a drug Acadopene in clinical trials for prostate cancer, lost $6.25 million in 2003.

While Eyetech is also unprofitable, it appears to have benefited from a partnership with Pfizer (PFE) to develop a drug for vision loss.

In general, as IPO investors get their feet wet again, they are looking for profitability in income statements. Biotechs were a bad bet last year, with several companies sinking below their issue prices.

Experts suggest the automotive industry could also be a tough sell. "TRW is in a sector that has been downgraded by a lot of analysts lately," Morreale said. Last week, Moody's rating agency said "continued sub-par financial performance by certain suppliers may result in selected downgrades" this year.

Nevertheless, Bancorp Bank's performance reflects the strength of financial services. The Philadelphia Stock Exchange Bank index is up 7% this year, after rising 28% in 2003.

Meanwhile, the overall market is holding onto stealthy gains; the S&P 500 is higher 2%. "If we can have a stable market, we have the chance for a good year in IPOs," Morreale said.

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