Much has been written about how the IPO market froze out biotech companies in 2008, but it looks like times are also tough for those who went public before the economy soured. Cadence Pharmaceuticals has seen a dip in stock price from $9 to $7.53 and drug-maker Affymax has dropped from $25 to $14.12 a share since their IPOs in 2006. But VCs hunting for bargains just agreed to infuse the two companies with $86.6 million and $42 million respectively, reports VentureWire. The investments are part of a well-documented trend across all industries as stock prices dwindle.

Presenting much lower risk to increasingly cautious VCs, the public market has sucked up millions of dollars that might have otherwise gone to startups — especially in biotech where product setbacks are also pushing down stock prices for public life science companies.

Early last year, Cadence missed the mark in a phase-three trial of its intravenous pain-killer Acetavance and its share price fell from $8.60 to $5. But its backers, including Bay City Capital, Domain Associates, Frazier Healthcare Ventures and Versant Ventures stuck with it — joining Venrock, New Enterprise Associates and T. Rowe Price Associates in this new $86.6 million financing closing today. The San Diego, Calif. company is issuing 12 million shares at $7.13 and warrants to purchase 6 million at $7.84 to these firms. It says it will use the money to continue testing Acetavance and Omigard, a topical gel that could prevent catheter-related infections.

Two years ago, Affymax encountered a similar situation when its leading anemia compound raised safety concerns. Its stock price quickly slipped from the low $40s, but previous investors Sprout Group and Bessemer Venture Partners stood by the company. Biotechnology Value Fund and ProQuest Investments jumped in for the latest action. Affymax will sell 2.8 million new shares of common stock at $11.25, and 652,262 new “units” at $15.33 (each unit consisting of a share and a warrant to buy two-thirds of a share of common stock) to these committed firms, according to VentureWire. This should give the company runway into 2011, when it hopes to launch anemia drug Hematide, currently in phase-three clinical trials.

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