Epizyme, a US-based clinical stage biopharmaceutical company, has just released its second quarter results which show it sitting on a large cash pile of $149m, comfortable enough to see the company through to 2015. The pile reached that size largely thanks to Epizyme’s initial public offering (IPO) which closed on 5 June and which raised $79.8m net of underwriting discounts and expenses. The IPO was priced at $15 per share, but came straight into Nasdaq’s charts at $20 and has since traded closer to $40, reaching its highest closing price on 16 July of $43.6.
The popularity of Epizyme’s stock has led to talk in some venture capital circles of a new approach being exercised towards IPOs: they say that venture capital firms are now leaving risk, reward and potential value on the table for public investors to effectively act as the next round of venture funding, rather than simply representing a juicy exit route. In the case of Epizyme, this kind of talk can make sense if you consider that the company is still only at Phases 1 and 1/ 2 for its two therapeutic treatments. It is even possible to think that venture capitalists might be trying heroically to restore credibility with the public markets, given the poor way that Facebook and other social media IPOs have struggled to trade above their offer prices (Facebook’s share price briefly poked its nose above its $38 per share IPO for the first time on 31 July, before falling back to close at $36.80).
However, Epizyme’s IPO comes amid a small flurry of biopharmaceutical companies that have been coming to the market this year (Onconova Therapeutics is another clinical stage biopharmaceutical company that just closed its IPO, and a successful one at that) taking advantage of an opening in public markets that have been largely shut to them since 2007. So the buy-side appetite for Epizyme and its peers is there, maybe regardless even of what clinical stage the company is at. In such an atmosphere, while you want your IPO price to ‘pop’, one wonders if Epizyme’s share price could not have been priced a little higher, brought a little more cash into the company coffers, and still popped.
Of course, not every biopharmaceutical IPO has flown out of the blocks. The underwriters for US-based biotechnology company Conatus Pharmaceuticals, which launched its IPO on 25 July at $11 per share but closed the day at $9.5, and has continued to trade sub-IPO price, have yet to decide whether they will exercise their customary option to acquire more shares at the offer price.
And not every deal is being left for the public markets to gobble up. Celgene Corporation, a US-based biotechnology company, was not the largest shareholder in Epizyme prior to its IPO, but still held a hefty 14.5%. Since Epizyme’s flotation, Celgene has gone on to bag an exclusive option to acquire investee company Acetylon Pharmceuticals, for which Celgene has made a $100m upfront, non-dilutive cash payment, and will pay a minimum of $500m should it choose to exercise its option.
James Mawson contributed to this article.
