Biotechs Avoiding the IPO Pool This Year -- Except for Profitable Ikaria
As the market started to recover last fall, it seemed biotech companies just couldn't get lined up to go public fast enough. Ironwood (IRWD), Anthera (ANTH), Trius Therapeutics, AVEO Pharmaceuticals (AVEO), Tengion (TNGN), Alimera Sciences (ALIM) -- they all filed their initial public offering paperwork within a few months of each other.
Then the first biotech IPOs started to price -- many struggling in the aftermarket despite steep discounts -- and suddenly no one was eager to hop in the queue. In fact, no biotechs at all filed for an IPO this year (unless you count diagnostics maker BG Medicine). Until Friday, that is, when Ikaria unveiled plans to raise $200 million in its initial public offering.
That's a lot of money for a biotech IPO, even in a good market. Ironwood managed to raise $216 million in February, but before that you'd have to go all the way back to Ribapharm's $260 million offering in 2002 to find a deal as big.
The exception would be Talecris (TLCR), which raised $950 million last fall. And Talecris has a fair bit in common with Ikaria:
- Both are profitable: Talecris reported 2009 net income of $154 million on sales of $1.5 billion from its blood-products franchise, while Ikaria had net income of $13 million on sales of $274 million from its nitric oxide drug for respiratory failure in infants.
- Both are using IPO proceeds to pay heavy debt: Talecris had $1.1 billion in debt, about half of which was paid off with the IPO. Ikaria has $245 million in debt and has also stated pay-off as its top use of IPO proceeds.
- Both are backed by big private equity firms that are bleeding money out of the company: Talecris has raided eyebrows because Cerberus Partners has stripped hundreds of millions of dollars out of the company through dividends. Ikaria, whose largest backer is New Mountain Partners, plans to distribute a $130 million dividend to its executives and directors, payable from a new $250 million loan.
- Both companies spent just over $70 million on R&D last year, which considering the difference in their revenues, speaks more to differences in business models than similarities.
Nasdaq photo by Flickr user bfishadow, CC.