StreetTalk: Your Cash Ain't Nothing But Trash: Wall Street Not Embracing BioTech IPOs

Some savvy scribe once said that initial public offerings were Wall Street's version of a Christmas gift. Investors shook the boxes for weeks, admired the colorful wrapping, and wondered just what was inside. When the big day came, presents were opened and opinions were formed that could either help or haunt a new publicly traded company for months, even years. What companies didn't want was the investment equivalent of returning their "gifts" the morning after Christmas.

Brian O'Connell

Hey, it's no coincidence that the term "Black Friday" is used primarily to describe Wall Street and the post-holiday shopping season. Traders use the term to describe the epic 1929 stock market disaster, and retailers cite Black Friday — the day after Thanksgiving — as the day that can make or break their year, from a financial point of view.

Yes, I know it's only September and the holidays are months away, but I like the comparison between Christmas gifts and IPOs — particularly biotech IPOs.

Investors tend to get excited when biotech companies go public, even if it's against their better nature. A knowledgeable investor realizes the odds are against you when betting on a new biotech issue. According to Pharmaceutical Research and Manufacturers of America, FDA approves only one out of five drugs that survives to get into human clinical trials. And, of 20 select biotech IPOs reviewed by the investment firm Burrill & Co. in 2004, only four have rolled out within their initial price range.

Internal server error