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A Time to Test Biotechs' Strength

Not bad for a platform company that is not yet profitable.

But Intrexon has a lot going for it. With a well-regarded biotech veteran, Randal Kirk, as its CEO, nine collaborations under way and programs not just in health care but also in food, energy and the environment, there is a lot for investors to be interested in.

Alan Mendelson, a partner with Latham & Watkins LLP, said that the story of an individual company matters a lot to investors. "Investors do bet on management teams. That helps a great deal. The science is important. If the company has licensing agreements, then that's validation from larger companies," he said.

But not all of the recent life sciences IPOs have done great. Medical device firms haven't even entered the fray this year, even though there were a few device IPOs in 2012. And diagnostics companies account for only three of this year's filings for IPOs, and the ones that began trading already, haven't exactly blasted out of the gate like the biotechs. NanoString Technologies Inc. (NSTG - Get Report), which began trading June 26, priced below its expected range at $10 per share and hit a low of $7.01 since. LipoScience Inc. (LPDX) in January priced its IPO at $9 per share, at the bottom of a range that it had already dropped -- it was trading at a 60-day moving average of $6.55 per share at the end of July.

Other companies, like Aratana Therapeutics Inc. (PETX), which reformulates human drugs into animal therapies, postponed their IPOs, then priced significantly below the range they'd earlier indicated. And some very early-stage biotechs, like Heat Biologics Inc. (HTBX), have made their money, but are trading about even with their initial stock price.

Macro events also matter, according to Renaissance Capital. "We continue to believe U.S. IPO activity remains captive to underlying macroeconomic trends, as evidenced by the deeply discounted offerings that were completed in late June following the Fed announcement referring to chairman Ben Bernanke's comments that the central bank might start pulling back on asset sales . That said, companies are offering valuation haircuts rather than scrapping their deals altogether, indicating that demand for IPOs persists, albeit only at a reasonable price," according to the IPO report.

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