The IPO market is sizzling hot. Yesterday steakhouse operator Texas Roadhouse
In July, restaurant IPOs stunk. Domino's Pizza
Roadhouse's 30% gain over the IPO price was as big as the company's portion sizes.
While Roadhouse's 11.5% operating margin exceeds the 9.2% at Outback Steakhouse
Theravance, with four potential products in clinical trials and seven others in preclinical studies, opened at $19 a share -- $3 more than the IPO price. Telavancin, an injectable antibiotic, is the only potential product in phase 3 trails and is targeting a market with $730 million in sales in 2003.
What is potentially limiting is an agreement with 18% owner GlaxoSmithKline
The relationship is complex and may limit Theravance's ability to bring in other partners because Glaxo can decide to opt in at any time prior to a successful phase 2 proof-of-concept trial.
Also disheartening is the 8.7 million options outstanding. That is a lot of dilution for a company with only 35.8 million shares.
These IPOs had grand welcomes. Roadhouse, a purveyor of food, is hardly revolutionary. Theravance, with revolutionary technology, is years away from having a product, assuming it can get one through the FDA maze and beat other competitors to market. Both, at this point, are priced to perfection.
Fool contributor W.D. Crotty does not own stock in any of the companies mentioned, although McCormick & Schmick is his favorite place for seafood.