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Biotechs to lead IPOs
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December 9, 2000: 7:00 a.m. ET
New issues end year with biotechs expected to lead, GenVec rated highly
By Staff Writer Luisa Beltran
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NEW YORK (CNNfn) - The IPO market has but one week left to end the year with a bang before investment bankers and investors leave for the holidays, and to do it, the market will need a strong push from two biotech issues.
The new issues market will all but shut down after this week as the holidays take hold and will not emerge until mid-to-late January.
This week, analysts believe a trio of deals could provide further evidence that the IPO market is on the rebound. Last week, biotech-related IPOs, such as Harvard Biosciences Inc. and Specialty Laboratories Inc., surged to post double digit gains. On Friday, Specialty Labs, a test developer, rose 46 percent in its first day after pricing at the top of its range. Just one day earlier Harvard Bioscience, a drug discovery tools firm, gained 31 percent.
This coming week, the focus will be on GenVec Inc. and Cellomics Inc. to follow in their tracks, although some analysts believe either company may still have to reduce their expected pricing range as Harvard Bioscience did to see a decent first-day pop.
"You have to cut to do well now and show the investing public that there is a visible cut," said David Menlow, president of IPOfinancial.com.
Anything biotech
Overall, the biotech sector has struggled in the past six weeks but are now fighting back, said Jim McCamant, editor of Medical Technology Stock Letter, an investment newsletter that focuses on biotech stocks.
"Biotechs are not affected by the economy," McCamant said. "People get sick even when they don't have jobs. This is a good time to be in the biotech sector."
GenVec Inc., a genomics play, has the best chance to do well, analysts said. Gaithersburg, Md.-based GenVec develops gene-based products that produce proteins at the site of disease.
 GenVec's therapy attempts to induce new blood vessel formation in the heart and elsewhere in the body. The company's lead product candidate, Biobypass Angiogen, treats insufficient blood flow in the heart and legs. Biobypass was developed with Warner-Lambert and is in Phase II clinical trials with the Food and Drug Administration.
"Gene therapy has been out of favor but we're finally getting to the point where the products are in later stage clinical trials," said Medical Tech's McCamant.
While promising, GenVec is not profitable, making it a tougher sell in an already skittish IPO market. The company had $11.3 million in revenues and $4.6 million in losses for the nine months ended September 30.
"There is somewhat of a demand for pharmaceutical and biotechs," said analyst Mike Falbo of ipoPros.com.
GenVec plans to offer 4 million shares at $14 to $16 each via lead underwriters J.P. Morgan. The biotech also has a major backer with Pfizer Inc. (PFE: Research, Estimates) owning a 10 percent stake after the IPO.
GenVec will trade under the proposed symbol "GNVC."
The biotech bounce
Cellomics Inc. may get also get a boost this week, analysts said. Cellomics develops drug discovery tools which let customers analyze cells quickly.
The company's name refers to the study of all the molecules that make up a cell, as well as their interactions within a cell. Pittsburgh-based Cellomics currently markets five products and has a number in development.
Cellomics plans to offer 6 million shares at $11 to $13 each, down from $16 to $18 a share, via lead underwriters Prudential Vector Healthcare.
The Cellomics deal may suffer because it is not using a top underwriter, analysts said. Prudential Vector Healthcare, a unit of Prudential Securities, is not known for doing the best IPOs.
"We don't see too much from Prudential," ipoPros.com's Falbo said.
Cellomics plans to trade under the proposed Nasdaq symbol "CLMX."
Professional Services
Resources Connection Inc. is the first Big Five accounting firm-related offering to hit the capital markets. Costa Mesa, Calif.-based Resources Connection is a former consulting division of Deloitte & Touche. Other Big Five members, which include KPMG, PricewaterhouseCoopers, Ernst & Young and Arthur Andersen, are also considering launching IPOs.
KPMG Consulting is expected to float its own IPO next year while PwC, the largest global accounting firm, is investigating whether to launch an IPO of its consulting division. Andersen Consulting, which won the right to split from Andersen Worldwide, parent of Arthur Andersen, is also exploring an IPO.
Resources Connection split from Deloitte in April 1999 and has no ties to the former Big Five firm, the company said in a filing with Securities and Exchange Commission.
Resources Connection provides accounting and finance, human resources management and information technology services to clients.
The company is profitable, earning $39.2 million in revenue on $2.2 million in income for the quarter ended Aug. 31, 2000. Resources Connection also touts some major clients including Banc of America Securities LLC, Nordstrom Inc. (JWN: Research, Estimates) and Credit Suisse First Boston Corp.
Expectations for the deal are slight since professional services IPOs have not fared well, analysts said.
"The Internet professional service stocks have been devastated in the last few months and this could dampen the debut of Resources Connection in the short-term," said Matt Zito, co-founder of IPOguys.com.
Instead, the deal may be best as a long-term hold, Zito said.
Resources Connection plans to offer 6.5 million shares at $12 to $14 each via lead underwriter Credit Suisse First Boston. The IPO will trade under the proposed Nasdaq symbol "RECN." 
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