Scandal Provides Another Reason Omeros Might Not Be the Biotech IPO Bellwether
As more biotech companies queue up to try their hand at an initial public offering, there's scandal-driven evidence that Omeros Corp.'s recent IPO flop may not be indicative of investor appetite for the biotech sector.
Omeros has so far been the only "true biotech" (i.e. money-losing, developmental-stage biotech) to go public in the current IPO window. The company priced at the low end of its target range and has so far been among the worst performers of all U.S. IPOs this year, according to Renaissance Capital.
But as BNET previously noted, Omeros might not be the ideal biotech to benchmark against. For starters, the company was a holdover from the last IPO window, which indicates persistence perhaps to the point of desperation. And while Omeros is in Phase III trials, its lead product is a generic combo drug for surgical applications (though heck, generic combos haven't drawn disdain in the obesity sector).
Now Luke Timmerman over at Xconomy reports that Omeros has been accused of "submitting false timekeeping records to the National Institutes of Health for grant work." The company's former chief financial officer, Richard Klein, says he was fired for blowing the whistle on the scandal. Omeros said it did not overbill the NIH.
The Xconomy article also states that Klein accused Omeros of "making false statements" regarding the incident in its IPO prospectus, and it recounts Klein's previous accusations regarding Omeros CEO Greg Demopulos' questionable tax practices:
For example, in 2007, according to Klein's complaint, Demopulos exercised stock options "and attempted to avoid reporting the taxable income or paying the taxes resulting from the option exercise as required by Federal tax law." After Klein found this out, his complaint says, he required Demopulos to report the taxable income to the IRS.All of this could mean that Omeros' poor IPO performance is tied to factors other than the company's "biotech" status. One banker likened Omeros to Acusphere, a drug delivery firm that's lackluster IPO at the beginning of the 2003 window did nothing to deter investor interest in subsequent biotech offerings.
For the sake of all the other biotechs waiting in the wings to go public, let's hope that's the case.
Whistleblower photo by Flickr user hughelectronic, CC.