This Day On The Street
Continue to site
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

Small-Cap Biotechs Pursue IPOs Fastest in Decade

New Biotech Names to Watch

This renewed interest in biotech companies has grown from a broad rise in risk-seeking behavior and central bank stimulus on a global level. This type of environment is highly supportive for biotechs looking to come into the market at strong valuations.

In many cases, these companies are still in the earliest stages of the drug development process (with some companies yet to complete even one clinical trial). It is now clear that the bar for progress has been lowered for biotechs looking to enter the market.

At this stage, most of the interest from institutional investors and hedge funds has centered on small-cap specialist companies with a clearly defined medical niche.

Some examples of names to watch can be seen with Enanta Pharmaceuticals (ENTA - Get Report) and Tetraphase Pharmaceuticals (TTPH - Get Report), which completed IPOs in March.

Enanta made a name for itself with its development of hepatitis C drugs, collaborating with AbbVie (ABBV - Get Report) and Novartis (NVS) in the process. The company reported second quarter revenue of $1.2 million, well below the $36.6 million seen during the same period last year. These declines resulted from the company's upfront payment of $34 million from Novartis in early 2012.

Tetraphase was a larger disappointment in the first quarterly earnings report after its IPO. The company is focusing its efforts on Eravacycline, which is a pill meant to treat multi-drug resistant infections (such as those seen in the urinary tract).

Tetraphase reported first quarter net losses of $2.8 million (30 cents per share). While this was an improvement on the net loss of $4.7 million (52 cents per share) seen during the first quarter of 2012, these figures were lower than the 27-cent loss per share that was expected by analysts.

To be sure, we are still in the very early phases of development in both companies but with the widespread enthusiasm that marked recent biotech IPOs, the early signs suggest initial valuations were on the high side and that continued weakness is likely into the latter parts of the year.

At the time of publication the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
Richard Cox is a university teacher in international trade and finance. His articles appear on a variety of Web sites, including, Seeking Alpha, FX Street and others. Investing strategies are based on technical and fundamental analysis of all the major asset classes (stock indices, currencies and commodities). Trade ideas are generally based on time horizons of one to six months.
2 of 2

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
Only $9.95
14-Days Free
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
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
ABBV $61.00 0.00%
AMGN $158.30 0.00%
ENTA $29.20 0.00%
TTPH $5.60 0.00%
AAPL $93.74 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs