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Rates of Return in Diagnostics IPOs by Market Cap

The rarest IPOs in recent months have been those in diagnostics, with only three completed so far this year. Nonetheless, we wondered how diagnostics companies that received the highest market caps in IPOs over the past two years fared against their smaller-cap counterparts on delivering rates of return to private investors.

The rarest IPOs in recent months have been in diagnostics, with only three completed so far this year—and two of those could be argued to be more genomics/drug discovery plays than true diagnostics (DNA chip firms Nanogen Inc. and Vysis Inc. went public in April, raising $39 million [See Deal], respectively). Nonetheless, we wondered how diagnostics companies that received the highest market caps in IPOs over the past two years fared against their smaller-cap counterparts on delivering rates of return to private investors.

In the chart below, we broke the IPOs out by range of post-money IPO valuations (greater than $100 million, between $50 and $100 million, and less than $50 million), comparing them by average pre- and post-money multiples of market cap to total private money raised. The results suggest that the low- and mid-cap companies drastically outperformed the large-cap ones, at least by this metric. Smaller deals generated nearly three and four times the returns shown by large cap IPOs, respectively. However, the small-cap results were significantly skewed by breath test developer Isonics Corp. , whose $4

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