Jeff Baglio, left, and Scott Stanton, partners at Gray Cary, say now is the time to file an IPO. (photo/lambertphoto.com)

The Yogi Berraism about the restaurant that’s “so popular no one goes there anymore” is the recent history of the initial public offering. Once the spot for irrationally exuberant entertainment, the IPO scene dried up in recent years. In 2003, the number of U.S. firms conducting IPOs dwindled to 84, down from 477 in 1999. In 1999 eight San Diego companies made their public debut. The bubble expanded to 11 in 2000, but burst in 2001 with three, followed by three in 2002 and five in 2003.

Now the IPO grill has reopened with tighter management, more sober venture capitalism, and a frantic rush to get it done before the market changes its mind. “The window is open right now and you have to run as hard as you can to get out because you never know when the window is going to close,” says Scott Stanton, partner at Gray Cary.

Stanton handled December’s $40 million IPO for Kintera, a San Diego-based, Internet-driven firm that provides a suite of fund-raising related applications for nonprofit organizations. Kintera handles back office processing and promotional Web sites and e-mails for nonprofit household names such as the American Heart Association and Big Brother.

“Kintera didn’t meet the ‘new’ criteria,” says Stanton. “They weren’t making money, for example.”

But the firm’s Internet-based donation tracking was considered defining for its category; and it has tested leadership. Chief Executive Harry Gruber was the pilot for InterVu, a local dot-com era success story. In 2000, InterVu was purchased by Akamai Technologies in a deal valued at nearly $3 billion. Last month, Gruber made headlines in the Philadelphia Inquirer for managing the SaveDisney.com e-mail campaign to oust Disney CEO Michael Eisner.

Kintera (Nasdaq: KNTA) recently traded at $15.02, near its high of $15.83 and about double its $7.91 low.

Attorneys can’t talk about specific deals during “quiet periods,” but Stanton says he’s working on two IPO deals now and expects an active summer of registrations at the SEC.

“There’s a lot of pent-up demand,” Stanton says. “Issuers of stock have had time to mature in their businesses and the companies that have survived are benefiting from the rebounding economy. That’s coupled with an increase in demand; institutions want someplace to put their money. With the turn in the market over the last 18 months, it’s a harmonious convergence of events.”

Eddie Rodriguez, principal at Fish & Richardson, says he’s seen about 50 new IPO filings since the first of the year. (photo/alandeckerphoto.com)

“I’m seeing a lot more (IPO) filings,” says Eddie Rodriguez, principal at Fish & Richardson. “There have been about 50 filings since the first of the year.”

Mike Garrett, chair of the Corporate & Securities practice group of Pillsbury Winthrop says his company also has increased activity. “We’re seeing some cautious optimism on the part of investors,” Garrett says. “We’ve been involved in a couple of IPOs and this has been a rarity in San Diego. There’s a renewed interest certainly in private placement activity.”

Jay de Groot, partner in charge of the San Diego corporate group of Morrison & Foerster says, “It’s not just the economy improving, it’s the institutional messengers starting to believe again.

“In the last six to 12 months, we’ve seen a tremendous spike in activity, particularly in San Diego,” de Groot says. “We have four IPOs in our office now in various stages.”

Jay de Groot, partner in charge of the San Diego corporate group of Morrison & Foerster, says it’s not just the economy, it’s the institutional messengers starting to believe again. (photo/alandeckerphoto.com)

De Groot was investor’s counsel in the $41 million October IPO for CancerVax, which is developing a cancer vaccine. CancerVax was one of four de Groot biotech financings in 2003, and they ranked among the top 15 for the year.

“CancerVax is a classic biotech,” de Groot says. “It’s a fairly long-term play that doesn’t necessarily relate to the economy; it’s driven by a degree of market optimism. CancerVax is somewhat unique in that they are later stage. Even though the company is fairly young, the cancer vaccine they’re working on was under development for seven or eight years.”

Last month, CancerVax (Nasdaq:CNVX) obtained an exclusive license from privately held SemaCo Inc. to develop novel technology for the potential treatment or prevention of cancer. In mid-March CancerVax was trading at $10.79, between its 52-week high of $13.35 and low of $8.82.

Medical device companies aren’t as sexy, de Groot says, but might be better investments. His client NuVasive, which makes devices related to the treatment of lumbar and cervical degenerative conditions, recently filed registration papers to conduct an IPO.

“What’s unique about (device companies) is that they have revenue,” de Groot says. “It fits with the return to fundamentals in the market place. Medical devices are sort of the poor stepchild to biotech, but they’re easier to get (FDA) approv(al) and that’s why they get revenue.

“They’re very different opportunities. With the device companies you’re going to hit a lot of singles and doubles and biotech is more like a grand slam or a strike out.”

Biotechs also have been active in follow-on financings. Last February, La Jolla Pharmaceutical Co. raised about $25.6 million from a sale of 8.7 million shares of common stock. La Jolla Pharm (Nasdaq: LJPC) develops therapeutics for autoimmune diseases including lupus and antibody-mediated thrombosis. It recently traded at $2.88, with a 52-week range of $1.12 and $5.21.

One of last year’s best performing IPOs was San Diego-based non-prime mortgage specialist Accredited Home Lenders (Nasdaq: LEND). On Valentine’s Day 2003, AHL offered 9.65 million shares at $8 per. In January, AHL posted record earnings of $4.98 a share on $100 million net income. Recently, AHL was trading at $35.46, more than four times its IPO price.

Not all IPO filings pan out. Acadia Pharmaceuticals, which is developing drugs to treat chronic pain and Alzheimer’s disease, filed papers in February of last year for a planned $70 million IPO. By August, however, Acadia withdrew its filing, citing market conditions.

Venture funding that sustains startups also has seen a rebound. Growthink Research reports San Diego County-based companies received $417 million in the fourth quarter, up from $123 million, $208 million, and $230 million the preceding quarters.

As primary outside counsel to Forward Ventures, de Groot has completed 15 financings in the last three years. “Venture firms are deploying capital, but they’re still being cautious,” de Groot says. “It’s to their advantage to be cautious and be a little more pessimistic in their outlook than maybe they should be because that keeps down valuations. They’re sort of not ‘fessing up to the fact that it’s getting better out there.”

“There’s definitely more enthusiasm in the last six months in both technology and biotech,” says Tom Coll, a partner at Cooley Godward. “Initially, it’s hard to sort out the wishful scrambling from real substance, but there’s a perceived opening of the financing window. Venture firms have money and if there’s a good deal you’ll get a lot of exuberance. We’re just not seeing as many good deals as you’d like.”

Coll says biotech plays are bring driven by “a perceived cycle in the biotech industry and people are guessing we’re on the upside now.”

Companies are looking to get deals done, rather than shock the world with their valuations. “The pricing of offerings is less aggressive,” says Rodriguez. “There’s pretty good value right now.”

It’s not the gadget, but what technology does for the company’s bottom line that’s important.

“It’s not as much technology as in ’99,” Stanton says. “Now it’s more of a technology angle in a traditional business. It could be Kintera or a service company that provides technology. If you have a software company, there might be an opportunity to cash in on the growth in IT (information technology) spending that appears to be going on. Software companies that are run right have the best margins in the world.”

Which brings us to battered and bloodied telecom. “The wireless technology arena is interesting,” admits Jeff Baglio, a partner at Gray Cary whose clients include Invitrogen and Qualcomm. “But the market is still deciding whose technology is going to be the winner. So I don’t see a wave of telecom placements in the near term.”