Staff Writer

Cumberland Pharmaceuticals Inc. may not be a traditional biotech, but it's still the first drug company to price an initial public offering since Bioheart Inc.'s measly $5.8 million debut 15 months ago.

"The market is open," Michael Brinkman, managing director of health care investment banking at Piper Jaffray & Co., told BioWorld Today.

Brinkman said he's interviewed roughly a dozen buy-side investors recently, and they said they'd buy into a good biotech IPO right now, if one were available. But the investors also cautioned that they might not say the same thing 90 days from now, given the fragility of the market.

Despite the immediate interest, it doesn't look like any true biotech IPOs will price in the immediate future. Brinkman said he isn't aware of any that are actually on file with the SEC, but he noted that "behind the scenes, there's a lot of activity going on," and he predicted a lot of true biotechs will make IPO attempts in the first half of next year.

For now, it looks like the first wave of IPOs will come from specialty pharmaceutical companies, like Cumberland, or other drug companies with marketed products and actual profits.

Nashville, Tenn.-based Cumberland markets Acetadote (intravenous N-acetylcysteine) for acetaminophen poisoning and Kristalose (crystalline lactulose) for constipation, generating net income of $4.8 million last year from sales of $35.1 million. The company also recently got FDA approval for Caldolor, an intravenous formulation of ibuprofen, which is projected to be its biggest money-maker.

Although Cumberland has a pipeline of preclinical assets, they are managed through a majority-owned subsidiary, Cumberland Emerging Technologies Inc. The parent company reported research and development expenses of just $4.4 million last year and cash and equivalents of $10 million as of March 31.

Wall Street's reception to Cumberland's IPO was lukewarm. The company priced its 5 million shares at $17 each, below the $19 to $21 target range. But the pricing beat Cumberland's original $14 to $16 goal, which it had kept since its original 2007 filing but increased last month.

Shares started trading on Nasdaq Tuesday under the ticker symbol "CPIX" and bounced slightly above and below the offering price before closing at $16.83, a loss of 17 cents, or 1 percent, for the day.

UBS Investment Bank, Jefferies & Co. Inc. and Wells Fargo Securities acted as book-running managers, with Morgan Joseph serving as co-manager. The offering is expected to net Cumberland $75.2 million, not including the potential sale of another 750,000 shares to cover any overallotments.

Who will follow in Cumberland's footsteps?

Those already on file with the SEC include Talecris Biotherapeutics Inc., Omeros Corp. and Prometheus Laboratories Inc., although none are "traditional" biotechs.

Talecris, a Bayer AG spinout that markets plasma-derived products such as immune globulin, filed for a $1 billion IPO two years ago. It later opted for a $3.1 billion merger with CSL Ltd., but those plans were scuttled by the Federal Trade Commission on the basis of anti-trust violations, putting Talecris back in the IPO queue. (See BioWorld Today, June 9, 2009.)

Omeros and Prometheus have been waiting patiently since the last IPO window: Omeros filed in early 2008 to raise $115 million, and Prometheus filed in late 2007 to raise $100 million. Omeros is still developmental: Its only revenues are from grants, and its lead program - which involves combining generic drugs for surgical applications - is in Phase III for arthroscopy.

Prometheus, like Cumberland and Talecris, has profits. It makes diagnostics for cancer, celiac disease and other indications, and it markets drugs like Entocort (budesonide) for Crohn's disease and Lotronex (alosetron hydrochloride) for irritable bowel syndrome.

Brinkman cautioned that although drug industry IPOs are starting to come to market, the bar is high. Traditional biotech contenders likely will need proven efficacy and a product less than three years from commercialization, he said.

Additionally, for the time being, Brinkman said it remains a buyers' market. Although public follow-on offerings from biotechs like Onyx Pharmaceuticals Inc., Human Genome Science Inc. and Orexigen Therapeutics Inc. are flying off the shelves, there are "a limited number of people to go and see" when you're selling a biotech IPO, Brinkman said. Generalist investors aren't back in that game - yet.

Published  August 12, 2009