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May 2007 issue
IPO Re-filings All The Rage In Health Care? - Some Recent IPO Withdrawals
Have Been Re-filed, Others May Follow Sign up for a trial subscription and get the current issue! Read more about Healthcare Corporate Finance News Read the past headlines.
Companies Mentioned in this issue:
21st Century Jobs Fund p11 |
IPO Re-filings All The Rage In Health Care? - Some Recent IPO Withdrawals Have Been Re-filed, Others May FollowDuring the past 12 months, 12 health care companies have withdrawn IPO filings, as shown in the chart appearing on page 2 of issue. Most recently, Perlegen Sciences withdrew its IPO on April 30. Of these companies, seven cited market conditions or unfavorable market conditions as the reason for the withdrawal, while one cited public and investor interest. Of the remaining four companies, one decided it had sufficient capital on hand, one submitted a laundry list of factors impelling the withdrawal, one was sold and one completed a merger. So what is happening now with these companies, and is it the right time for some to take another stab at going public? At least a few people offered some answers, and the buzz we have been hearing is that the IPO market is heating up for medical device, biotech and biopharma companies, especially for companies with later-stage clinical data. In the case of ActivBiotics, Glenn Kazo, the chief business officer, confirmed one suspicion we have about more than one company in this group—that, "The IPO and withdrawal have actually generated a lot of business, financial and investor interest." Since many of these companies have released new clinical data or initiated new trials since withdrawing their IPO filings, we suspect there may be more re-filings in the coming months. Just as we were going to press, actually, ImaRx Therapeutics re-filed its IPO. Since ActivBiotics’ IPO withdrawal, Mr. Kazo stated, "We have been executing all of our milestones." Most recently, in February ActivBiotics announced that patient enrollment had begun in a phase II study examining the effect of rifalazil, an anti-chlamydial antibiotic, on atherosclerotic changes in the carotid artery—changes that are strongly correlated with an increased incidence of cardiovascular and stroke events. Patients will receive treatment with either rifalazil or placebo, over a 12-week period, and will be followed for 18 months with serial magnetic resonance imaging and ultrasound of the carotid artery. Additionally, the company announced it had completed enrollment in a phase III study of rifalazil for the treatment of patients with intermittent claudication, a common manifestation of peripheral arterial disease. Regarding the deal climate for health care companies these days, Mr. Kazo commented, "In this environment, you only do an IPO when there is no better alternative. The M&A market, not the IPO market, is currently the preferred exit solution for investors." But, ActivBiotics isn’t making any determination right away about whether or not to re-file for an IPO, and its doubtful that decision would be considered again until perhaps sometime in 2008. "We won’t have our next set of data for about nine months." ActivBiotics isn’t even planning to consider any strategic partnerships until the next set of data is complete. PTC Therapeutics cited the most unusual reason we have seen for an IPO withdrawal in the past year, by stating that it now has sufficient capital to continue operations. We learned from William Baird, III, the chief financial officer of the company, that since the time PTC Therapeutics originally filed for an IPO, the company has secured a combined $42 million in upfront payments from Pfizer (NYSE: PFE), CV Therapeutics (NASDAQ: CVTX) and Schering Plough (NYSE: SGP), and collected about $20 million in grant money. "Now the company is well-capitalized and in a strong financial position to achieve its current goals," stated Mr. Baird. Currently, the company has three ongoing phase II studies in process, with its initial focus on certain genetic disorders—although the product candidate in development may also have a broader scope of applications. "We continue to watch the markets," Mr. Baird said, but PTC has not yet been decided whether it will pursue another S-1 filing, or other collaboration agreements. "We’re happy with the partnerships we have right now," he noted, "and we expect more clinical results later this year." At that point, the company will likely be in a better position to determine when it might need to consider another financing event of some kind. We also talked with Dr. Robert Zerbe, the president and chief executive officer of QuatRx, who observed, "The IPO market is stronger now for health care companies," than it was when QuatRx pulled its IPO. At the time of the original IPO filing, Dr. Zerbe said, "We really did hit a bad time in the biotech market, which prompted the withdrawal." But QuatRx, too, has changed since then, and we heard that their development programs have come a long way with nice results. Currently, QuatRx has three compounds in active studies, as well as one out-licensed compound in development. When the company initially filed its IPO, trial results were still several months away, and the public markets were not responding well to companies without fairly solid, later-stage data, or revenues. Dr. Zerbe told us, "All these programs have either advanced or entered clinical-stage development since our last filing," and that, "more data and trials are yet to come this year." One of the companies that had withdrawn its IPO about seven months ago, Amicus Therapeutics, just filed again in April for an IPO. In the case of Amicus, we are guessing that the departure and subsequent return of the company’s president and CEO, John Crowley, influenced the Amicus re-filing. In early March, it was announced that Mr. Crowley had completed a six-month active duty military obligation with the United States Navy. Amicus is focused on developing small molecule, orally-administered pharmacological chaperones for the treatment of a range of human genetic diseases. BioVex Group’s Philip Astley-Sparke, the president, chief operating officer and a director of the company, was pretty upbeat despite having had to pull their IPO. "We had a pretty successful road show. I know that’s an oxymoron given we didn’t get public, but we got a lot of orders and on the day before pricing we felt we were in a good spot to get public. There was quite a bit of interest in the technology and the company." However, on the day of pricing, he said, "Even though 25% of our orders did convert, they were smaller orders—we only covered about half of our book. At that time in the market, a number of biotech stocks were dropping in value after they hit the market, so investors were more likely to dip a toe in the water, with a small order instead of a large one, and then wait to see how the stock performed after the IPO." In retrospect, Mr. Astley-Sparke doesn’t blame the market entirely as the reason BioVex Group’s IPO was unsuccessful. "We only moved to the U.S. in 2005, so we did not have great visibility and were not very well known at the time. Now we have more of a following," he stated, "Nothing is planned, but if we were to attempt an IPO again, given we are on course to meet the milestones we projected at the time, I would be optimistic for success." The company is applying its technology platform initially in the areas of oncology and infectious disease. BioVex is developing proprietary, engineered forms of HSV, a virus that can be manipulated to selectively kill tumor cells, without harming healthy cells, as well as to prevent or treat HSV infection, which is the primary cause of recurring genital herpes. BioVex has already completed a phase I clinical trial in a variety of tumor types, initiated a phase II trial, initially in melanoma, and additional trials are in the works. Now the company is conducting a phase I/II trial in head and neck cancer, using BioVex’s product candidate in combination with first-line chemotherapy and radiation as well as pancreatic cancer. Mr. Astley-Sparke stated, "Currently our focus is on advancing our clinical trials, which have tracked well since the IPO failure. As we collect more data, we will continue to evaluate various opportunities for an exit, including an IPO, an M&A or other strategic deal." He also revealed that, "Right now we are working on a private financing, which is expected to close in the coming months." As for the rest of these companies, the strength of clinical data and financial position of each will determine whether an IPO would now be successful. |
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