Aim Low?

Another IPO, another bad haircut.

Yesterday Pharmasset, a virology-focused biotech with several clinical assets and a strategic alliance with Roche, priced five million shares on the Nasdaq at $9 apiece, well below its original $12-14 price range, and one million fewer shares than it had originally hoped to sell.

That the biotech IPO market is pretty miserable and has VCs running toward the steely embrace of Pfizer et al. is hardly news. But what grabs us is how just about every company--and just about every underwriter--manages to be so poor at predicting its value on the open market.

So few biotechs price within their stated IPO ranges that it's practically comical. Even the Pharmassets of the industry (companies that supposedly tick all the boxes for public investors: strategic alliance? check. proof-of-concept data? check.) get a poor reception, and pricing above the range is almost unheard of (the exception to that rule being Affymax, last year).

One factor may be the scarcity of significant biotech IPO investors, and the relative pricing power of the handful of specialists, a phenomenon we're looking at in the next issue of START-UP.