Updated from 10:16 a.m. EDT

After a few years of dreary results, it would appear that in 2004 the health care IPO business is, well, back in business.

In just over four months, 17 companies -- from biotech and drugs to surgical centers and medical equipment -- have gone public, according to Renaissance Capital and its IPOhome.com Web site. That accounts for 38% of the IPOs so far this year, and there are many more such companies looking to go public.

Those 17 IPOs surpass the full-year number of deals for the health care sector in 2003 (eight) and 2002 (13). And at the current pace, health care IPOs this year should easily top the 23 recorded in 2001, but it will take quite a feat to match or beat the 79 IPOs of 2000.

Boom and Bust

But put the health care IPOs in perspective: The number of deals looks impressive, but their total value is still about $1 billion less than the proposed Google offering, which is expected to fetch $2.7 billion.

In dollar terms, health care ranks third behind financial services, which boasts $3.39 billion in deals, and technology, whose IPOs over the first four months total about $2.66 billion, says Renaissance Capital.

Only three health care IPOs raised more than $100 million. One of those companies,

Kinetic Concepts

( KCI), a developer of wound care technology and products such as hospital beds, raised $540 million.

And though the number of health care IPOs has increased sharply, it doesn't mean they've all performed well.

During the first quarter, Renaissance Capital says, two of the worst-performing IPOs through March 31 were health care issues, when comparing offering prices with their performance thereafter.

The worst IPO during the first quarter was

GTx

(GTXI)

, whose stock dropped 28%. The company is working on treatments for prostate cancer and its side effects.

Another big loser was

Renovis

( RNVS), whose stock sank 15% during the quarter. Renovis is trying to develop drugs for neurological disorders.

Renaissance Capital notes that GTx, which went public Feb. 3, was "aggressively priced," a lesson apparently learned by underwriters of other health-related IPOs during the first quarter. With one exception, six biopharmaceutical companies going public during the first quarter were "forced to price at a significant discount" to their original original pricing ranges. "The six biotech IPOs following GTx were priced at an average of 27% below the midpoint of their ranges," Renaissance Capital says.

Follow-up research shows that of the 17 health care IPOs that came to market this year through May 7, nine were officially priced below the lowest figure of their original price range. Two were priced above their original price range. Six were trading below their offering price, including Renovis and GTx; two were trading at the offering price; and nine were trading above the offering price.

Prospects Ahead

The question is whether these early results provide enough guidance to investors for the rest of the year, because the health care IPO market could get quite crowded. Twenty-four more companies -- from instrument makers to an eye care retail chain to biotech companies -- were seeking to go public as of May 7, says Renaissance Capital. They have filed their intentions with the

Securities and Exchange Commission

, though only a handful have proposed a price range.

IPO experts say it's difficult to predict how many of these pending issues will achieve their asking price, never mind postpone or withdraw the deals. The transactions must be evaluated on a case-by-case basis.

Three health care companies have postponed IPOs this year, citing market conditions. One of them, Xcel Pharmaceuticals, has walked away from the public market twice -- April 9, 2004, and Jan. 31, 2003.

"What this says is that health care deals are available," said Jeffrey Hirschkorn, a senior IPO analyst for Current Offerings, a new-issue advisory service. "The harder sells are the biotech and pharmaceutical deals," he said. "But overall, the market for new issues is vastly improved."

Despite investors' interest in the next big thing, Hirschkorn said future IPOs, especially for biotech firms, could be affected by the delays or price cuts that have marked some previous biotech IPOs. "I don't think the IPO market will tail off," he added, "but you have to be more selective."

Hirschkorn predicted that rising interest rates won't affect health care IPOs, although rising rates would hurt the prospects of financial services IPOs. He said one general indicator of health care IPO prospects would be the

Nasdaq Composite

index.

That yardstick might pose concern for future IPOs. If you look at at several indices -- the

S&P 500

, the Amex Pharmaceutical, the Amex Biotechnology and the Nasdaq Composite -- you'll notice decent growth in the last 12 months (even though the drug index has been quite erratic).

However, if you track the indices just for 2004, you get a different picture. Closing index prices through the week of May 7 show the S&P 500 down 1.2%, the drug index virtually even, the biotech index up 3.9% and the Nasdaq down 4.2%.

David Menlow, president of IPO Financial Network, an IPO research firm, is leery of the rapid rise in IPO issues and filings by biotechnology and drug firms, especially those with no revenue or profit and experimental products in early stages of clinical trials.

"The biopharmaceutical stocks have really gotten a bad rap, and it was justified at the time," said Menlow, referring primarily to late last year and early this year "when underwriters started force-feeding" issues into the market.

He said the good news has come from IPO candidates that had backing from large drug companies, while the bad news comes from tiny companies with many dreams and little else. As a result, he said, some IPOs were delayed, postponed or had their offering prices reduced. Big price cuts, he said, "are akin to an investor revolt."

One example of good news is

Eyetech Pharmaceuticals

( EYET), which is developing a drug to treat the eye disease macular degeneration. During the first quarter, Eyetech's stock climbed 58% from its offering price. Eyetech meets a key criteria for Menlow, because it is developing its drug with

Pfizer

(PFE) - Get Report

.

Eyetech Thursday said it had filed a registration statement with the SEC covering a proposed offering of 4 million shares of common stock plus an additional 600,000 shares to cover potential over-allotments. Eyetech will not sell any shares in, or receive any proceeds from, the offering. All of the shares will be sold by selling stockholders. The announcement knocked down the stock by $2, or 5.8% , to $32.34 in late morning trading. The stock is still trading 54% higher than its $21 offering price.

Menlow doubts there are many Eyetechs on the horizon, adding that investors must be careful, especially given the sector's different stages. There's the "bio-anything" stage, in which there's a general clamoring for new issues that's based on a sense that the broad health care market is booming. There's the sector-rotation stage, in which investors decide that it's time to move their money into biopharmaceuticals. And there's the cautious-investment stage, when investors look at specific companies and specific experimental treatments. "We're still in an individual-company market stage," Menlow said.

Of course, it could always get worse, as was the case the last year when investors sat on their hands and wallets -- and most of the 2003 drug/biotech IPOs ended the year trading below their initial offering price.

"If the broader pharmaceutical sector is showing protracted weakness or has topped out, you won't be able to mention the words biotech IPO," Menlow said.