Omeros | Lackluster IPO Debut a Good Sign?

Omeros (NASDAQ: OMER) launched itself onto the Nasdaq global marketplace yesterday with its initial public offering of 6.82M shrs priced at $10 raising approximately $68M less underwriting expenses. Its foray however, was more dud then thud relative to its peers in the Biopharma IPO Class of 2009. For Omeros is the only clinical-stage, pre-commercial, pre-revenue entity to get out and it would appear that the market is not going to reward entities at this stage of development as demonstrated by an immediate sell-off of some nearly 20% before clawing back a bit on this first day of trading to close at $8.73 per share.

This debut provides a very interesting piece of data, though with an N=1 it is hardly statistically significant, nevertheless let’s try and make this “empirical” statement – Pick your analogy, the biopharma public markets are thawing, the biopharma public markets window is opening etc., what is now been demonstrated is that the IPO route for pre-clinical biopharma is less liquidity opportunity for early investors and more financing event to capitalize operations.

Therefore a takeaway here may be to expect big pharma M&A to remain hyper-active for the foreseeable future. Though such a collection of trends may not be ideal for life science entities as options and leverage arms may be limited it is however, a sign that as the public markets claw and scratch their way back that newly positively trading companies are theoretically higher quality going concerns that are being demanded by the street; a clear message that irrational exuberance is no longer accepted…at least in the life science healthcare sector.

AGA Medical Holdings | Back in the Queue

AGA Medical (Plymouth, MN) developer of interventional devices for the minimally invasive treatment of structural heart defects and peripheral vascular disorders, first filed with the intention to reach the public market in 2008 (‘nuff said), now on the heels of what is shaping up to be, dare one say, an active 2H09 life science IPO market with three entities out [Mead Johnson Nutrition (NYSE: MJN), Cumberland Pharma (NASDAQ: CPIX) and Talecris (NASDAQ: TLCR)] and now three in the filed queue planning to get out prior to year’s end. As the first snowfall is expected today in Boulder, CO it is feeling uncharacteristically warm and fuzzy inside – can ‘it’ thaw concurrent with old man winter settling in?


The AGA deal again makes sense, that is generally speaking…a pattern is emerging where these entities who have surfaced on the public markets are commercial-stage, certainly not pre-clinical or early-clinical but Phase IIb or later. It sounds as if AGA had revenue circa 2008 in the $180M range with a positive net income to boot. The offering is expected to be priced in the $19 to $21 range on 13.75M shares therefore raising an anticipated $260M to $289M less underwriter expenses. The deal is expected to be managed by Bank of America (NYSE: BAC), Citigroup (NYSE: C), Deutsche Bank (NYSE: DB), Leernik Swann, Wells Fargo (NYSE: WFC) and Natixis Bleichroeder.

Founded in 1995 by Dr. Kurt Amplatz, a former University of Minnesota professor and researcher, AGA Medical’s range of Amplatzer® products help improve patient outcomes, reduce length of hospital stay and accelerate patient recovery times. Amplatzer® products advanced the treatment of the most common congenital “holes in the heart,” such as atrial septal defects, patent foramen ovale and ventricular septal defects. More than 1,500 articles supporting the benefits of Amplatzer® products have been published. AGA Medical markets Amplatzer® products in 101 countries worldwide.

Note: According to the [C]LSDF 2009 Biopharma IPO Watch List confidence in the new issues appears to be maintained as the bottom has not dropped out post issuance; an additional encouraging sign of the receptivity of the markets.

Talecris | And Then There Were Three!

Part of the [C]LSDF ongoing series Watching the Bio IPO Market.

Talecris Biotherapeutics (NASDAQ: TLCR) made a thunderous debut with its Initial Public Offering on the Nasdaq today, offering 50,000,000 shares at $19 and raising $950M in the process. The fun however, did not stop there as the third life science offering of the year powered through the remainder of day, ringing the closing bell at $21.15, or a market cap of ~$1.06B! Speaking of ringing the bell, look for Talecris CEO Larry Stern to ring the opening bell at the Nasdaq on Friday morning (2 October 2009).

According to the [C]LSDF IPO Watch List the three companies to get out this year have raised in aggregate ~$1.85B, what is of particular interest is how they have responded by the very least maintaining or bettering their opening valuation (see price chart below).


What I find to be of particular interest in the case of Talecris is the story behind the story – or more specifically, the early investors who were handsomely rewarded by the street today. Just to put this tale into context Talecris is a robust entity, 2008 financials indicate revenue of $1.4B and a net income of $66M and thus account for (IMHO) the makings of a completely legitimate offering from a (potential) going-concern perspective.


Back in 2005 private equity (then) behemoth Cerberus Capital Management and Ampersand Ventures acquired from Bayer (XETRA: BAY.DE) their Talecris (then NPS Biotherapeutics) franchise for $590M, as part of a reorg effort. In the interim Cerberus placed some massive bets on Chrylser, who filed for bankruptcy protection and GMAC, who found themselves in need of a government bailout to the tune of $5B. Needless to say Cerberus was taking their lumps and the limited partners were clamoring for a return of their capital therefore, a liquidity opportunity for Talecris was paramount; the first shot came via a planned IPO circa 2007 but as the public markets then turned to ice the filing was killed; strike one. The next effort came back in August of 2008 when a potential monster $3.1B deal for Talecris was placed on the table by Australian blood plasma company CSL, this deal however fell apart primarily due to antitrust concerns. So in 2009 third-times-a-charm and Talecris finally gets out, in a still challenging environment.

What does this IPO mean to Cerberus? Well, various sources have reported that the fund owned 74% of Talecris prior to the IPO and retained approximately 38% post IPO, based on day 1’s closing price that values their piece of the action in the ballpark of $400M but don’t feel too bad for Cerberus as it appears as though over $800M in dividends were distributed in 2005-06. So all in maybe a return of $1.2B, call it maybe 2.5-3X. It is being widely reported that Cerberus was all in for less than $100M and therefore returns of 20-25X are being touted – I can’t quite get my head wrapped around that math and the distributions from a percent ownership perspective. If you know better than [C]LSDF, and that is probably most folks, will you please provide some insight? Or if there are any super-motivated MBA students out there I’m certain this would make for a fascinating case study. One thing I do know for certain is that the life science IPO market will remain an interesting place to observe.

Anthera | Working to Thaw the Markets

CLSDF continues to maintain keen watch on the thawing of the public equity markets, calibrated in a semi-quantitative approach via the life science IPO pricings. If all three of the current filings get out priced ‘as-is’ I would then call the score FINANCING EVENT 3 & LIQUIDITY OPPORTUNITY 2. A nice balance and it makes sense as the three clinical-stage pre-revenue companies (Cumberland, Omeros and Anthera) appear to intend to use the public offering as a capital source to finance the phase III to commercialization processes.

Anthera Pharmaceuticals is the newest name to be added to the CLSDF-IPO Watch List. Hayward, CA-based Anthera Pharmaceuticals is a privately-held company committed to developing and commercializing clinical pharmaceutical products that address unmet medical needs of patients with life-threatening, chronic and acute inflammatory diseases and autoimmune disorders. The Company has acquired from Eli Lilly (NYSE: LLY) and Shionogi & Co. worldwide rights (excluding Japan) to a series of clinical and pre-clinical compounds that inhibit the enzymatic activity of members of the phospholipase family - a group of enzymes responsible for the release of arachidonic acid and subsequent production of leukotrienes‚ prostacyclins and other mediators of inflammation. These highly potent compounds inhibit novel‚ upstream steps in the inflammation cascade and have the potential to address a variety of diseases.

1 IPO! 2 IPO?? 3 IPO???

UPDATE: Lots can happen between an early morning blog post and the end of the business day. In this case Omeros has set its IPO terms; 6.82M common shares offered between $10 and $12 per share. So the company is hoping to raise between $68.2 and $81.8M. The planned ticker to trade under is NASDAQ: OMER. Bring on the opening bell!

First Fed Chairman Bernanke says that the worst recession since the Great Depression is seemingly behind us, then my home re-appraises for 30K higher than what was hoped and prayed for, and now…all sorts of activity in the life science IPO market. What is going on here? Have we hit bottom? A quick scan to my right of the early CNBC coverage and I see that the market is up +31 at the open, green, green, green everywhere I look. Really? Hmmm…well ever the optimist, I too am swinging from Bear to Bull and in fact would like to go out on a limb here and have CLSDF call Tuesday 16 September 2009 as the bottom.

The public life science markets have been en fuego the last few months; just take a look at the NASDAQ Biotech Index (below) and similarly the 2Q09 OnBioVC Trend Analysis [HERE] shows similar positive investment growth in the private life science companies.

Last month Nashville, TN-based Cumberland Pharmaceuticals (NASDAQ: CPIX) went public raising $85M @ $17 per share and was essentially the first IPO in about two years sans the Bristol-Meyers Squibb (NASDAQ: BMY) spin-off of the Mead Johnson Nutrition (NYSE: MJN) unit. Since its debut Cumberland has more or less maintained its strength and avoided a major sell-off, at last check it is trading at $15.40. And just last week Cumberland launched their fever and pain drug Caldolor®, an injectable form of ibuprofen intended for patients who are hospitalized and cannot take oral drugs.

Now with Cumberland a public entity and certainly enjoying the time, effort and expense of remaining a public going-concern here comes the flood of filings behind them. Well OK, perhaps just a trickle, but the trickle may be the preface to the flood.

Filing paperwork with the Securities and Exchange Commission is the Seattle-based biotech Omeros, a clinical-stage company whose most advanced product candidate is OMS103HP, designed to improve postoperative joint function and reduce pain following arthroscopic anterior cruciate ligament reconstruction surgery. Currently in Phase III an NDA filing is expected to be submitted to FDA in 2H10. The planned offering would be underwritten by Deutsche Bank Securities, Wedbush Pacific Growth Life Sciences, Leerink Swann, and Needham & Company, according to the filing.

Similarly Research Triangle Park, NC-based Talecris has also filed paperwork with the SEC regulatory agency. With more than 4,500 employees and annual revenues north of $1.4B a Talecris IPO is certain to dwarf what happened with Cumberland and Omeros, if they can get out, being a pre-revenue entity. It would not be surprising to see upwards of $1B raised on this offering. Talecris is marketing Gaumnex® for immune therapy deficiencies, Prolastin® for alpha1-antitrypsin deficiency and Koate-DVI® for hemophilia.

Clearly there is a buzz of activity transpiring in the space. Where will you be positioned when the flood gates open?