2010: The little IPO engines that usually couldn't

Every year everybody who's anybody in biotech--and a lot who aren't--goes to the JP Morgan conference in San Francisco in January. This year the talk quickly turned bullish as biotech execs and investors wanted to believe that the IPO was making a comeback.

But that buzz didn't last long.

A spate of IPOs early on ran into an ugly reality: Investors just really weren't all that excited by the classic, money-losing biotech. Red ink, even if it was spilled in pursuit of solid data, was not a trendy color this year. Even Ironwood Pharmaceuticals, an ambitious developer with a clear shot at a near-term FDA app, had to cut its price significantly to complete its offering. And as we headed into the new year, its shares were trading below its $11.25 IPO price.

Smaller biotechs that faced even bigger development risks, a common condition in this industry, faced an even tougher reception on Wall Street. When Pacific Biosciences actually managed to price its IPO in the middle range at $16, raising $200 million, analysts noted what a rare success it was. And that company is backed by some sexy venture groups lured in by its game-changing technology, something few developers can match.

It was some consolation, though, that 2010 offered even a small IPO window. In 2009, it was slammed shut. But how does a small biotech involved in a mid-stage study of a lead drug get to play in this kind of game?

In January, we'll be back in San Francisco, where we suspect that the IPO discussion will be tempered by a harsh reality. Let the scrum begin.