CurrentOfferings.com Story:

Biotech companies alter IPO plans

By Andrew Morse, The Deal, March 24, 2004 Biotech companies alter IPO plans The already-soggy market for new biotechnology offerings appeared to be getting even more waterlogged Wednesday, as a pair of companies announced they were altering their IPO plans. San Diego-based Anadys Pharmaceuticals Inc. dropped the expected range of its 6.25 million-share offering to between $7 and $8 a share from the original estimate of between $11 and $13. Montvale, N.J.-based Memory Pharmaceuticals Corp. delayed its 5 million-share offering, which had been expected to price Tuesday night, to next week.

Anadys and Memory are only the latest in a line of biotech companies that have accepted lower prices or delayed their debuts as enthusiasm for the sector wanes along with overall stock prices. The turnaround is in sharp contrast to the beginning of the year, when a passel of IPO hopefuls lined up after the successful launch of Eyetech Pharmaceuticals Inc.

A sputtering stock market, as well as the early-stage nature of many of the recent deals, has contributed to the biotech IPO malaise. In addition to Anadys, three other biotechs have priced below their expected range. Another, Alameda, Calif.-based Peninsula Pharmaceuticals Inc., postponed its offering indefinitely.

"IPO investors always look to the general market, and the general market isn't doing too well right now," said Tom Taulli, a professor at the Marshall School of Business of the University of Southern California and author of the book "Investing in IPOs." "It may take a few months for this to sort itself out."

Anadys designs drugs to treat viral and bacterial infections. Worldwide sales of drugs treating those conditions totaled about $40 billion in 2002, according to the company's prospectus. But Anadys is years away from getting a product approved to capitalize on that opportunity. Its most advanced drugs, which treat hepatitis and are based on the company's proprietary isatoribine compound, have only reached Phase 1B of human testing.

Like many early-stage biotech companies, Anadys has racked up losses over the past five years, culminating in a $24 million loss last year.

The change in Anadys' offering price represents a 38% drop from the midpoint of the range. SG Cowen is lead underwriter on the deal, with Legg Mason Inc., Needham & Co. and Piper Jaffray & Co. Anadys is receiving legal advice from Thomas Coll and Steven Przesmicki of Cooley Godward LLP, while the underwriters are using Jeffrey Marcus and Taylor Stevens of Morrison & Foerster LLP as counsel.

Memory's delay is also a troubling sign for the biotech IPO market. The company filed its initial plans with the Securities and Exchange Commission on Dec. 23 as a host of companies jockeyed for position. But as the overall market stagnated then retrenched, the deal has been put off.

The company is developing drugs that treat central nervous system disorders, particularly those that affect memory and cognitive functions. Those diseases include age-related conditions, such as Alzheimer's. Memory's most advanced product is MEM-1003, a treatment for Alzheimer's that has completed Phase 1 testing. A second drug candidate is in Phase 1 tests that are being conducted with its partner Roche Holding AG.

UBS Investment Bank is underwriting the deal with support from Banc of America Securities LLC, SG Cowen and Fortis Securities Inc. Memory is using Ellen Corenswet of Covington & Burling for legal advice, while the underwriters have turned to Donald Murray of Dewey Ballantine LLP.