Anthera listing confirms weak IPO market

Date March 05, 2010

The disappointing public outing for Anthera Pharmaceuticals this week, eventually listing on the Nasdaq at a 50% discount to its proposed price, was not an encouraging sign for those US companies with active IPO filings at the SEC who must now be reassessing their next financing steps.

The weakness of Anthera’s IPO – $54m raised was the lowest since Cumberland Pharmaceuticals cracked open the IPO window last August – mirrors the poor performance of Omeros since it went public in October. Anthera and Omeros are both developmental stage, high risk investment opportunities, similar to five of the six companies currently pursuing an IPO. The one mature company on the list, Prometheus Laboratories, with eight marketed products and annual profits since 2005, therefore appears the standout IPO candidate, but only if it clears up uncertainty over rights to its biggest selling product (see tables below).

Investors still risk averse

Anthera was the fifth US pharmaceutical company to go public since the broader stock market recovery in the second half of 2009.

As the table below shows, the initial optimism that IPOs would start to flow has dampened as the two most recent public offerings, Anthera and Ironwood Pharmaceuticals, have only squeezed onto the market at a significant discount to the proposed price. The average discount between the filed price and the actual list price is 20%, even after some companies had already cut back their price targets.

US IPOs since window re-opened in second half of 2009 
Company  IPO Date  Raised ($m)  IPO Price ($)  Filed Price ($)  Average discount  Latest share price (4 Mar 10)  Share price performance since IPO 
Cumberland Pharmaceuticals  10-Aug-09  85  17  19 - 21  -15%  11.47  -33% 
Talecris Biotherapeutics  01-Oct-09  950  19  18 - 20  0%  21.24  12% 
Omeros  08-Oct-09  70  10  10 - 12  -9%  5.98  -40% 
Ironwood Pharmaceuticals  03-Feb-10  203  11.25  14 - 16  -25%  13.41  19% 
Anthera Pharmaceuticals   01-Mar-10  54  7  13 - 15  -50%  7.08  0% 
Averages          -20%    -8% 

In terms of how investors have reacted to these newly listed companies, it is no coincidence that the two stocks to gain in value, Talecris Biotherapeutics and Ironwood, relate to two of the most mature companies with either marketed or pipeline products targeting niche markets or areas of unmet medical need.

Although Ironwood floated at a 25% discount to its proposed price, this price had been ambitiously raised by the company just prior to its IPO; the eventual amount raised of $203m was still higher than the $173m it had originally targeted when filing its S-1 document in November.

Encouragement for Prometheus

Anthera’s IPO experience will not have encouraged many of the companies listed in the table below, particularly the likes of Aldagen who perhaps represent the ultimate high-risk investment (Aldagen flotation would be real test of investors' mettle, October 29, 2009).

Which just leaves Prometheus as the one company with the potential to launch a successful IPO attempt this year, without having to opt for a massive discount and its shares mostly likely to hold or gain value.

Group revenues reached $342m last year, over half of which was derived from sales of Entocort EC at $204m. However, the Crohn’s disease drug was licensed from AstraZeneca five years ago and the deal is set to expire by the end of this year.

Until this contract is renegotiated it seems unlikely investors will accept such a high degree of uncertainty over the future of its most important drug.

Potential IPO candidates in the US  Count of Products by Status and Therapy Area 
Company  S-1 Date  Seeking to Raise  Company Founded  Marketed  Phase III  Phase II  Phase I  Pre-Clin  Research  R&D Therapy Area 
Prometheus Laboratories  19-Dec-07  $100m  31-Dec-95  GI:  1,  
Aveo Pharmaceuticals  16-Dec-09  $86m  19-Oct-01  Onco & Immuno:  9,    
Trius Therapeutics  06-Nov-09  $86m  30-Jun-04  Systemic anti-inf:  3,  
Aldagen  28-Oct-09  $81m  03-Mar-00  Cardio:  3, Onco & Immuno:  3,    
Alimera Science  30-Oct-09  $80m  04-Jun-03  Sensory:  3,  
Tengion  24-Dec-09  $40m  10-Jul-03  GU: 4, GI: 1, Cardio: 1 

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