A total of six companies completed IPOs on US exchanges in the first two months of 2012, but investors still lack enthusiasm
for new issues in the sector. Five of the six issues came below their target price range. Only Verastem, a preclinical therapeutics
company developing drugs that target cancer stem cells, managed to price at the midpoint of its $9 to $11 target, raising
a total of $55 million by selling shares at $10 each. Existing investors committed to purchasing nearly a third of the offering.
The company is led by Christopher Westphal, the former CEO of Sirtris Pharmaceuticals, which he sold to GSK in 2008 for $720
Renewable Energy Group raised $72 million in the first life-sciences IPO of the year. The biodiesel producer sold 7.2 million
shares at $10 each, well below its range of $13 to $15 a share. The therapeutics companies Cempra Pharmaceuticals and ChemoCentryx,
the digital health company Greenway Medical Technologies, and the agbiotech Ceres all went public in February. Collectively,
these companies that went public in the first two months of the year hoped to raise as much as $505.7 million, but raised
$354.4 million, nearly 30% less than they sought. They also needed to sell 10% more shares than they set out to sell in order
to raise what they did.
Venture financings also got off to a strong start with companies raising $1.8 billion globally in January and February, a
22% increase compared with the same period a year ago. Among the largest financings so far was startup Warp Drive Bio's potential
$125 million in funding, $75 million of which is equity financing tied to the achievement of milestones. The company, backed
by Third Rock Ventures and the drug giant Sanofi, is using proprietary genomic tools to search inside microbes for potential
new natural product drugs. The deal comes with a built-in exit for investors, by requiring Sanofi to buy Warp Drive should
it meet its milestones.
On the regulatory front, the Obama Administration's proposed budget for FDA in fiscal year 2013 calls for $4.5 billion, a
17% increase in funding. The increase is expected to come almost entirely from industry user fees. User fees overall are expected
to fund about 45% of the agency's budget. The government's contribution to funding FDA will essentially remain flat under
It is critical that Congress move quickly to pass the renewal of the Prescription Drug User Fee Act (PDUFA) and not allow
the legislation to get bogged down in extraneous issues. User fees provide nearly two-thirds of the funding for drug reviews
today. They do not, however, address the chronic underfunding of the agency, which Congress will also need to address at this
time when there is continued pressure to cut spending.
G. Steven Burrill is chief executive officer at Burrill & Company, San Francisco, CA, 415.591.5400, firstname.lastname@example.org