Can blue-ribbon panels make blue-chip stocks? That's the question facing potential investors in GMP, and some aren't so sure.

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This Fort Lauderdale, Fla., biotech start-up is looking to net at least $172 million and perhaps much more in an IPO early next year that could give the company a $1 billion market capitalization. And it has appointed a dazzling array of top doctors and scientific brainpower from the world's top universities to its board and scientific advisory panel.

These include Judah Folkman, a renowned Harvard cancer researcher who's studied cancer-starving anti-angiogenesis drugs, and Steve Gorlin, a serial entrepreneur and founder of EntreMed ( ENMD), a much-touted biotech that licensed Folkman's discoveries and rocketed to $100 a share this year. It now trades around $22.

Industry watchers say there's little doubt that GMP could raise a hefty chunk of cash to add to its existing $114 million pile, depending on the health of the biotech IPO market next year. But some are skeptical that the company can deliver on its promise of finding myriad new treatments for disease and develop ground-breaking new medical technologies. Top scientific names or not, the company has a long way to go before it's likely to generate substantial revenue, putting its potential $1 billion valuation in peril.

Simplicity

GMP's plan is simple: These much-lettered scientists will scour universities and other research cauldrons for promising drug and medical product candidates, extracting and licensing potential cures for mankind's most difficult ailments. GMP has set up a dozen subsidiaries to evaluate everything from new cancer and diabetes drugs to new wireless medical technologies and nerve regeneration products. It says it has already licensed 20 technologies since its founding in 1999 from universities like Harvard, MIT and Johns Hopkins.

So far, however, this company -- founded only 18 months ago -- has virtually no revenue and only one modest product on the market aimed at improving genomics research. The remainder of its products is mostly in very early stage development or remains to be brought in. That raises red flags for some investors.

"An absolute start-up at $1 billion, Judah Folkman or not, is an awfully big stretch," says Sam Isaly, managing partner of OrbiMed Partners, a major New York biotech investment adviser and fund management company.

GMP wouldn't comment on its business plan, citing Securities and Exchange Commission rules barring public talk prior to its IPO. It filed to float last month, with Salomon Smith Barney as the lead underwriter.

Some New York investors who short stocks say the company has its fingers in too many pies, effectively operating as a venture capital firm or a technology incubator. Furthermore, GMP faces heavy competition in in-licensing products from universities and elsewhere, since most big pharmaceutical and biotech companies also scour the same territory for potential products and often have much deeper pockets to buy such research.

"The shorts are going to be all over this," says one corporate finance executive who asked to remain anonymous, referring to investors who bet the stock will decline. "It's going to be the shorts vs. the longs."

The Cancer Theme

Of course, there's nothing saying that this IPO couldn't fly. Retail investors may jack up the price of this stock after it leaves the gate just on the cancer-cure theme alone, as they drove up shares in EntreMed earlier this year, though that company's promise is far from being realized and competitors like Bristol-Myers Squibb ( BMY), Pharmacia ( PHA) and Genentech ( DNA) are well ahead in angiogenesis treatments.

"The retail people love cures for cancer," says one New York fund manager, who says names like Judah Folkman are enough to bring in the retail crowd similar to Celera, which raised nearly $1 billion in a follow-on offering largely on the promise of the mapping of the human genome and the charisma of scientist impresario J. Craig Venter, who heads the company. The human genome is still more an area of promise than product.

Still, some say the IPO market isn't likely to be as strong next year, since the momentum-crazed daytrading crowd has largely gone back to day jobs instead of pouring gasoline on highflying stocks like Protein Design Labs ( PDLI - Get Report) and Affymetrix ( AFFX).

"2001 is likely to be a tougher year for IPOs," says Marc Goldberg, managing director of BioVenture Investors, a Worchester, Mass., venture capital fund. But, he says, tech IPOs may suffer worse than health care IPOs, the latter of which at least offer the promise of proprietary products and paths to profitability, key themes investors are seeking.

The year 2000 was something of a watershed for biotech IPOs and follow-on fund-raisings, fueled by excitement over the mapping of the human genome and the biotechnology industry's success in bringing innovative new products to market, in particular protein-based drugs called monoclonal antibodies.

Like No Other

According to CIBC World Markets, there were 52 biotech and related IPOs this year, a record, raising some $4 billion in new money to fund companies in 25 different subsectors of the biotech market. The pre-IPO value of the companies averaged $275 million in 2000, compared with $70 million in the last great year of biotech IPOs in 1991, CIBC says.

"This has been a year like no other in dollars raised and IPOs done," says Peter Crowley, CIBC managing director for health care financing. "The buy side couldn't get enough."

While the market for IPOs has slacked in recent months with a flood of six-month lockups coming off and a slowdown in tech investing, Crowley and others say they're optimistic the fervor could return to the biotech market early next year.

"It's hard to know what the market will be looking for," adds Crowley. "We know they like product stories, but they could very well like technology names."