There She Is, Your Ideal: Who's the Fairest of Them All? the Post-Internet Market for Initial Public Offerings Casts Its Vote for Start-Ups in the Health-Care Industry

Article excerpt

Modern medicine is a source of hope and comfort to more than the sickly. With Wall Street otherwise limping along, the health-care industry is making investment bankers feel better than they have since the tech bubble burst. The battered mar-ket in initial public offerings (IPOs) has gotten an especially powerful booster shot. "Health care is one of the only sectors that have worked this year," says Frank McGee, an IPO analyst with Dealogic CommScan, a research firm.

So far this year, one of every five initial public offerings has been for a health-care company. Over the next three months, 12 more health-care concerns--one of every four IPOs--are scheduled to come to market. And these new issues are making money. So far this year, health-care IPOs are up 8 percent over their initial offering price--outshining well-established stocks, which are down 10 percent this year as measured by the Standard & Poor's 500 Index.

Back in April, when Nasdaq stocks were hitting their lows, Select Medical Corp. set off the new medi-trend. The firm, which manages long-term-stay hospitals and rehab facilities, was priced at $9.50 a share and closed its first day of trading slightly above, at $10.12. But by last week its price of $18.25 was almost double the offering price. Since Select Medical hit the market, more than 20 other health-care companies have also gone public.

In a jittery market, health-care companies have the appeal of being recession-resistant. Whatever else happens, people are still going to get sick. And once those 77 million baby boomers get just a little bit older, they're going to need a lot of health care: replacement knees and hips, bypass jobs and hospital beds, along with medications. "This sector provides a perfect combination for investors considering IPOs. Where else can they get real earnings and also a meaningful growth story?" says Mitchell Blutt, an investment banker with J.P. Morgan Partners, who helps bring health-care companies to market. The hospital operators and medical-supply firms that have done the best are what David Pryce, manager of health-care hedge fund Bear Creek Capital in San Diego, calls "the boring, consistent and performing parts of the health-care market."

Investors who may have had enough excitement in recent years are instead bidding up basics like United Surgical Health Partners, which operates surgical centers. It went public on June 8, priced at $14 a share, and is trading now at $23, up 64 percent. Unilab, a California laboratory-testing firm, came to market in early June at $16 and is up 50 percent, to more than $24 a share. …