This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Medical IPOs Hunt for Cure

Investors looking for contradictions easily found them in the initial public offerings for medical companies last year.

And there's a good chance they'll see a repeat performance this year, meaning plentiful offerings, many withdrawn IPOs and numerous deals in which underwriters have to knock down the offering prices.

In 2005, for the second consecutive year, medical IPOs outnumbered any other category, according to Renaissance Capital, a Greenwich, Conn., firm that provides research on new offerings. Last year, there were 34 health-care IPOs among the 194 offerings. Most were drug, biotech or medical-device companies, but Renaissance Capital's health-care category also includes services companies.

The health-care field also produced a sickening number of withdrawn IPOs, or deals that were pulled from the market. Fourteen of 45 IPOs withdrawn last year had a medical connection.

Medical IPO hopefuls and their underwriters "have to understand that investors are very picky," says Melanie Hase, an analyst at Renaissance Capital. "Investors are wary because many small companies fail."

Another measurement of investor wariness is the final offering price vs. the initial offering price. Using this yardstick, medical IPOs have done poorly.

Hefty Discounts

Last year, 24 of the successful health-care IPOs -- 70% of the total -- had final offering prices below their underwriters' original efforts. Among nonmedical IPOs, 36 companies, or 23% of the rest of the new offerings, went public at prices beneath their investment bankers' initial proposals. In 2004 , three-fifths of medical IPOs were discounted vs. 30% of the nonmedical IPOs.

Renaissance Capital measures the amount of the discount by comparing the midpoint of an IPO's original price range to the final offering price. For example, if the initial range is $9 to $11 and the final price is $8, Renaissance says the IPO was discounted 20%, or $10 minus $8.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
CRYO $0.31 0.00%
THLD $4.37 -1.40%
AAPL $128.45 -1.50%
FB $78.94 -1.80%
GOOG $558.64 0.57%


DOW 18,132.70 -81.72 -0.45%
S&P 500 2,104.50 -6.24 -0.30%
NASDAQ 4,963.5270 -24.3630 -0.49%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs