Seeking Alternatives to a Tepid U.S. IPO Market
While 2011 saw several biopharma IPO success stories—including NewLink Genetics and Clovis Oncology, both late-stage cancer companies with promising programs that priced late in the year—the number of biopharma IPOs priced in 2011 (seven) was down 46% from 2010.
The appetite for risk taking in IPOs continued to be low, with a focus on de-risked stories in Phase III development or those with marketed products. Heightened market volatility in 2H11 contributed to this muted activity.
A challenging global economic environment is prompting some companies and investors to explore additional financing and public listing options, including alternatives to the traditional U.S. IPO.
U.S. based GI Dynamics, a developer of non-surgical approaches for treating type 2 diabetes and obesity, successfully completed an IPO in Australia during the summer of 2011 and now trades on the Australian Securities Exchange (ASX).
Trimel Pharmaceuticals listed on the Toronto Stock Exchange and completed a concurrent private placement through a reverse merger with a capital pool company, a commonly used method of going public in Canada utilizing a clean public shell company created for the purpose of identifying and merging with a promising private company.
Options to list on the ASX through reverse merger also exist and these reverse merger options, in both Australia and Canada, can be quicker that the traditional IPO route, often taking about three or four months to complete.
Several private companies attempted reverse mergers with public companies traded on major U.S. exchanges. But, the U.S. reverse merger process can take significantly longer to complete, sometimes taking nine months or more.
Synageva BioPharma, a clinical-stage biopharmaceutical company focused on treatments for rare diseases, successfully completed a reverse merger with Trimeris and traded up nearly 50% in its first month of trading. However, Allozyme could not consummate its proposed merger with Poniard Pharmaceuticals, indicating the common stock of the company resulting from the proposed merger would not qualify for listing on the Nasdaq Capital Market.
Although changing, public perception of reverse mergers into public shells can be negative as investors weigh the fear of the “pump and dump” scenario against success stories like Cougar Biotechnology, acquired by J&J for over $1 billion.