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Monday, December 16, 2013

2013 Financing of the Year Nominee: Opthotech's $192 Million IPO

It's time for the IN VIVO Blog's Sixth Annual Deal of the Year! competition. This year we're once again presenting awards in three categories to highlight the most interesting and creative deal making solutions of the year. The categories are: M&A of the Year, Alliance of the Year, and Financing of the Year. We'll supply the nominations (about a half dozen in each category throughout over the next week or so) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.


Ophthotech had a grand vision: its IPO would help fund Phase III testing of its lead candidate, platelet-derived growth factor inhibitor Fovista (E10030) to treat wet age-related macular degeneration. That motivated it to be aggressive in its IPO dealings, leading to the largest biotech IPO fundraising this year: $192 million. And in a year filled with impressive public market debuts when public market debuts of biotechs were one of *the* top stories, Ophthotech's IPO deserves your vote for financing of the year.

How'd they pull it off? Rather than aim for a specific amount, Ophthotech upsized the deal to maximize fundraising in the still-sweltering September IPO market. It increased its IPO price range once and then priced above the second range, at $22. It also increased the number of shares sold to 8.7 million from an initial 5.7 million.

Now that investor IPO interest has cooled, Opthotech’s all-out pragmatic approach seems particularly prescient. “As far as the IPO size, we always believed it best to take any potential financing risk off the table,” Ophthotech CEO David Guyer told our sister publication START-UP. “In biotech, there are always things that come up – the need to enrich a trial or pre-commercial activities. We always thought that if we were fortunate enough, we would increase the size of the offering.”

In May, ahead of the IPO, Ophthotech also got $83 million from a royalty financing worth up to $125 million with existing investor Novo A/S and a $50 million mezzanine venture round. All told, that gave the biotech $319 million in cash at Sept.  30.

Ophthotech might need every bit of that cash, and maybe more, for an ambitious Phase III program. The company initiated two Phase III trials for Fovista in combination with Lucentis (ranibizumab) in August and plans to start a third Phase III trial in the first quarter of 2014. The three trials are expected to enroll 1,866 patients at about 225 locations globally. Fovista is intended to work in combination with anti-VEGF (vascular endothelial growth factor) drugs like Lucentis, Eylea (aflibercept) and Avastin (bevacizumab), which are the current standard of care for wet age-related macular degeneration (AMD), though Avastin is used off-label.

Fovista came out of Eyetech Pharmaceuticals, which kicked off the first post-genome bubble IPO window in 2004. Although the Eyetech IPO went well, the main product as anti-VEGF Macugen (pegaptanib) was soon crushed by competitors. OSI Pharmaceuticals (now part of Astellas Pharma) acquired Eyetech for $935 million in 2005 and then spun-out the anti-PDGF projects, including Fovista, into Ophthotech. Valeant later picked up Macugen for a mere $22 million.

Ophthotech investors are likely to wait a while for the next big milestone – initial top-line data from the Phase III program isn’t expected until 2016. But even as IPO valuations have been sliding into winter, Ophthotech has added to its initial IPO upside. In its first day of trading, Ophthotech was up 20%; by Dec. 11, it had added 27% from the offer price. That gives the company a market cap of $886 million. All this signals that investor hopes are still riding high, undeterred by flagging 2013 IPO returns or the long wait until a major milestone. If all this financial finagling gets investors the wholly owned blockbuster they are hoping for, then it will have been well worth it.

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