IPO hopefuls line up after woeful 2011


Another turbulent period on the markets last year meant only 22 drug developers floated on one of the world's stock exchanges, down from 25 in 2010 (see table). However it looks as if 2012 is getting off to a more hopeful start with two US companies already announcing pricings for their IPOs.

Last week Verastem, the cancer stem cell company, confirmed it would be looking to raise up to $50m and in a more ambitious market debut Merrimack Pharmaceuticals is hoping it will be $167mm richer following any listing. While Merrimack’s float will be a substantial one what will show the true strength of any recovery in the IPO market is whether Verastem will get away at the price range it has set, $9-$11. The group currently has no products in the clinic and is relying on its expertise in a hot area of research and the previous track record of chief executive Rich Aldrich, who has the distinction of selling Sirtris Pharmaceuticals to GlaxoSmithKline for $720m in 2008.

US remains strong man among the weak

If Verastem does get away on such slender promise it will almost certainly open the doors for other riskier biotechs to try their luck, including Puma Biotechnology and Rib-X Pharmaceuticals who all last year filed accounts with the SEC. Such a trend would raise hopes that a reversal in the decline of IPOs recently might be on the way (Appetite for US IPOs to be tested with riskier propositions, November 29, 2011).

The analysis below includes drug makers listing on global stock exchanges over the last two years; it excludes medical technology and diagnostics companies and any listings in China.

IPOs among drug makers
2010 IPOs 2011 IPOs Amount raised 2010 ($m) Amount raised 2011 ($m) Change
US 13 12 793 680 (14%)
Europe 7 5 588 133 (77%)
Global 5 5 133 142 7%
Total 25 22 1,513 955 (37%)
Including Otsuka 3,913

However, if there is an up tick in the number of IPOs in 2012 once again it most likely to be US companies leading the race to the market. Although last year the number of US listings fell from 13 to 12, they were still more than double the amount of European floats.

The relative strength of the US markets also meant that Chinese biotech Tibet Pharmaceuticals chose the US rather than Hong Kong to make its debut, raising $16.5m in the process to help further its drug portfolio of modern versions of traditional Tibetan medicines.

Close shave

The Nasdaq market also managed to support one of the biggest fundraising of the year, Clovis’s $130m listing. This was only eclipsed by the mega $2.2bn flotation of Shanghai Pharmaceuticals, which took place in China.

But while it managed to get away Clovis was among a number of companies that failed to achieve the price it was hoping for. While it was a less severe scalping than the likes of Tranzyme Pharma, which floated at a 66% discount to its filed price, it did show the lengths companies had to go to and the concessions they had to make to get to market.

The hair cuts experienced by companies last year echoed those of 2010 which saw the likes of Ironwood Pharmaceuticals raise $215m, floating at $11.25 per share, well below the $14-$16 filing price. But 2012 could be the year the group sees its shares, which are less than a dollar above the float price, tick up again with an anticipated EU approval date in April and a June PDUFA date for linaclotide, its irritable bowel syndrome product.

European woes

While the sheer number of biotechs and investors available in the US helps the country to regularly beat Europe on most measures, what has held the continent back is the uncertainty surrounding the currency used by the majority of its members.

This means that it is unlikely that the number of European IPOs will significantly increase until the sovereign debt crisis is sorted out. In a measure of the deepening problems afflicting the euro in 2010 nearly half of the listings came from France, including Novagali Pharma and AB Science, last year there were none from this country.

Tellingly, Sweden, the place where three out of the five 2011 European IPOs occurred, still has Swedish krona rather than euros as its currency. The country also boasted one of the biggest and most notable floats of the year with the $98m launch of Karolinska Development.

The group, which has a drug development and investment arm, managed to achieve the upper end of its filing price of SKr42 per share when it floated in April, indicating an appetite for this hybrid company, which has exclusive product agreements with the Karolinska Institute and a number of Nordic universities to in license, develop and then sell their products.

So while there is encouragement that two companies are at least attempting to brave the markets this early in the year, with the continued economic uncertainty in Europe that could infect the rest of the world, 2012 might again be another subdued year for private companies looking for an exit through the markets.

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