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.
Discuss Outback Steakhouse and GlaxoSmithKline -- and thousands of other stocks -- on The Motley Fool discussion boards.
Fool contributor W.D. Crotty does not own stock in any of the companies mentioned, although McCormick & Schmick is his favorite place for seafood.