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Number of companies going public skyrocket in volume, capital

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Lost in all the excitement over the flood of private-equity money into the stock market in 2007 has been the increase in the number of new companies going public with initial stock offerings.

"2007 is off to a strong start," said Scott Gehsmann, a capital markets partner at PricewaterhouseCoopers.

Traditionally quiet during the first quarter of any year, IPO activity in the first three months of this year has climbed to record highs in both volume and capital. More than $12.1 billion has been raised through 64 new issues.

"As we expected, the financial services and technology sectors were much more active than in the first quarter of 2006, and financial sponsors continued to be a major factor in the market, backing 40 percent of all IPOs and raising 55 percent of proceeds," Gehsmann said.

The big winner in the IPO race so far this year has been, not surprisingly, a hedge fund, Fortress Investments.

It jumped 67 percent on its first day of trading in February, after pricing its $634 million offering at $18.50 a share. Fortress closed Friday at $28.01.

California companies represent a big share of the 2007 IPO market, raising $5 billion in funds compared with $4 billion last year.

Two San Diego companies are part of the rush to market, Optimer Pharmaceuticals (Nasdaq: OPTR) and Orexigen Therapeutics (Nasdaq: OREX). Both companies have been well received on Wall Street.

Optimer Pharmaceuticals -- a company involved in the discovery, development and commercialization of anti-infective products -- went public Feb. 8 at $7 a share, below market expectations.

However, it has moved steadily higher ever since, closing Friday at $10.20.

"We are pleased with the milestones we have achieved thus far in 2007," Optimer CEO Michael Chang said.

"Our most notable accomplishments in the first quarter include our initial stock offering and the steady advancement of our OPT-80 program. We will continue to expand the number of clinical sites for both OPT-80 Phase three studies with the goal of completing these trials in 2008," Chang said.

Orexigen Therapeutics -- a biotech company that develops product candidates for the treatment of obesity -- held its IPO at the end of April at $12 a share. It has moved quickly to the Friday closing price of $15.78.

Orexigen was one of only three biotech companies that were able to launch their IPOs in April. The other two issues came from Princeton, New Jersey and China.

The IPO pipeline is crowded for the rest of 2007. However, only one San Diego company has officially filed to go public.

NovaCardia, a clinical stage pharmaceutical company developing drugs to treat congestive heart failure and atrial fibrillation, filed for its IPO at the end of March. The underwriters on the deal are JPMorgan (NYSE: JPM) and Credit Suisse (NYSE: CS).

"We continue to believe 2007 will be a better year for IPOs than 2006, and possibly the best year of this decade," Gehsmann said. "A strong IPO pipeline, continued activity by financial sponsors, and the resurgence in financial services and technology sectors are very positive signs."

Once dominated by U.S. companies, more and more foreign companies are bringing their public offering to this country.

Foreign registrations accounted for $1.8 billion of the $12.1 billion raised in the first quarter. That's down from $2.8 billion in the first quarter of 2006.

Three IPOs came out of China, two each from Greece and Israel, and one each from Brazil and the Philippines.

Three of the top 10 IPOs in the first quarter came from abroad, compared with four in 2006.

While financial and technology will continue to lead the rush to market the rest of this year, there is probably one other IPO that will leave a good taste in the mouth of investors.

After years of discussing plans to good public, Einstein Noah, the owner and operator of the Einstein Brothers chain of bagel shops, filed to go public Friday. It will trade on the Nasdaq under the symbol, appropriately, of "BAGL."

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