CurrentOfferings.com Story:

Renovis IPO Prices Low, Then Rises

By Andrew Morse, The Deal, Feb-6-2004

Shares of South San Francisco-based Renovis Inc., a biopharmaceutical company developing stroke treatments, popped in early trading Thursday, Feb. 5, but only after the company priced its 5.5. million-share issue well below its previously expected range.

In early trading, shares of Renovis surged approximately 7% to $12.97 after pricing at $12. A prospectus filed with the U.S. Securities and Exchange Commission forecast an anticipated range of $13 to $15.

The offering, the third from a biotechnology company this year, raises rather than answers, questions about the state of the market for pharmaceutical IPOs. Hopes that the sector was on the brink of a renaissance were raised in late January, when ophthalmological drug maker Eyetech Pharmaceuticals Inc. surged 55% on its debut. That optimism was dashed earlier this week when GTx Inc., which designs prostate cancer therapies, closed below its offering price.

All three companies have drugs in Phase III testing, the last stage of testing before submission to the U.S. Food and Drug Administration for marketing approval. Renovis and Eyetech already have deals with established Big Pharma companies, which investors see as an imprimatur of confidence in the smaller concerns.

Some analysts say that suggests the performance of the IPOs has less to do with biotechnology specifically and more to do with the stock market generally. Eyetech's IPO, for example, came shortly after the broader market's recent rise, when investors might have been more receptive to a new issue. As long as the market recovers its footing, they say, biotechnology from companies with late-stage products and alliances with Big Pharma will likely receive a reasonably warm response.

"The market overall for the year looks good for IPOs," said Tom Taulli, a professor at the Marshall School of Business of the University of Southern California and the author of "Investing in IPOs." "It's not going to be straight up though. It's going to be choppy."

The IPO raised more than $61 million, which Renovis will use to advance its lead drug candidate, Cerovive. The drug protects brain cells from damage caused by acute ischemic strokes and is being tested by Renovis partner AstraZeneca plc, the U.K.-based drug giant.

Acute ischemic strokes are caused by blocked arteries to and in the brain. They can choke off the flow of oxygen to the brain and are the most common form of stroke, accounting for 85% of stroke cases in the U.S. They differ from hemorrhagic strokes, which are caused by bursting or rupturing arteries.

Cerovive doubles the three-hour window for stroke treatment, according to a recent filing with the SEC. Renovis acquired the Cerovive compound when it purchased Centaur Pharmaceuticals Inc. in December 2002. Centaur had already licensed the product to AstraZeneca at that time. The company also is working on two pain treatments, both in Phase II testing.

And in a separate transaction from the IPO, Renovis is also selling 250,000 shares at the offer price to biotechnology giant Genentech Inc., another vote of confidence in its products.

Goldman, Sachs & Co., CIBC World Markets, Piper Jaffray & Co. and SG Cowen underwrote the IPO. They have an over-allotment option of 825,000.

Alan Mendelson and Mark Roeder at Latham & Watkins LLP provided legal counsel to the issuer on the IPO, while the underwriters turned to Scott Miller at Sullivan & Cromwell LLP for legal advice.

Renovis has an interesting mix of investors. They include CentPharma LLC, which owns 16.3%; San Francisco-based Alta Partners, 12.1%; Palo Alto, Calif.-based Skyline Ventures, 7.3%; and affiliates of the Rockefeller family's venture capital business Venrock Associates, with 10.1%.