By George Chamberlin
Daily Transcript Financial Correspondent
September 16, 2005

The recent announcement by Science Applications International Corp. that it will file for an initial public offering of common stock makes the diversified company the latest San Diego-based business to link up with Wall Street.

“The principal purpose of the initial public offering is to better enable SAIC to use its cash and cash flows from operations to fund organic growth and growth through acquisitions, as well as to provide SAIC with publicly traded stock that it can use for future acquisitions,” said the company in a release earlier this month.

The IPO could be one of the biggest public offerings since last year’s stock launch by Google (GOOG). SAIC has grown into a corporate giant with more than 43,000 employees in 150 cities worldwide. The research and engineering company -- the largest employee-owned company in its industry -- is already a member of the Fortune 500.

The marketplace for new public companies has been relatively quiet since the boom of the late 1990s. In 1999, 486 companies issued IPOs. But when the tech stock bubble burst, so did the IPO market. Only 68 IPOs were financed in 2003.

“The IPO market continues to repair itself after the bubble of 1999-2000,” said Linda Killian, manager of the IPO Plus Aftermarket Fund, in a letter to shareholders. She said there is evidence the offering market is returning to its historical norms.

“In addition, those companies that have been going public have been fundamentally stronger, as more issuers are coming to market with profits than during the bubble,” said Killian.

Last year did show evidence of a rebounding IPO market. More than a quarter of the 216 offerings were from companies based in California. And, at least five were companies headquartered in San Diego County.

The best performing of the local issues has been Senomyx (SNMX), a La Jolla biotechnology company that works with food and beverage companies to develop flavor enhancers.

The shares came to market at $6 in June of last year and are currently trading above $18.

Senomyx recently extended a contract with Kraft Foods (KFT) to develop “novel flavor modifiers” for the company’s dessert products. It also has contracts with Cadbury Schweppes (CSG), Campbell Soup (CPB), Coca-Cola (KO) and Nestle.

“Our goal is to continue to leverage our discovery and development capabilities by establishing additional collaborations with market leading companies seeking to create a competitive advantage for their products,” said Senomyx CEO Kent Snyder.

Also showing a profit since its 2004 IPOs have been Acadia Pharmaceuticals (ACAD) and WebSideStory (WSSI). Acadia priced its offering at $7 a share and now trades above $11. WebSideStory, which delayed its IPO several times, hit the street at $8.50 and currently trades near $17.50.

Things have been a bit tougher for Metabasis Therapeutics (MBRS) and Orange 21 (ORNG). Metabasis shares rose to more than $8 following its IPO in June, priced at $6. It now trades at $5. Orange 21, a Carlsbad sunglass company, spiked from its IPO price of $8.75 to $11.50 within weeks of the offering. However, the share price now stands at $6.25.

So far in 2005, there have been 18 IPOs by California companies. That includes two companies based in San Diego. Shares of CryoCor (CRYO) have declined steadily since its July IPO at $11 a share and now trade above $7. Bank of the Internet (BOFI) has fared about the same. It priced its March offering at $11.50 and currently trades near $9.50.

Wall Street is littered with the remains of many disastrous IPOs. But that may be changing. A study by the IPO Plus Aftermarket Fund found that 64 percent of the companies that went public in 2004 were profitable. That compares with just 25 percent back in the bubble days.

And, today’s companies are more mature. IPO companies in 2004 have been in business an average of 16 years, compared with just 10 years in 1999 and 2000.