Contributing Writer

With the pricing of its IPO Thursday, Achillion Pharmaceuticals Inc. became the fourth biotech to enter the public markets this month. The New Haven, Conn.-based company raised nearly $52 million through the sale of 4.5 million shares at $11.50 per share.

The deal priced below Achillion's forecast range of $14 to $16 per share, but if the underwriters exercise their option to 675,000 shares to cover overallotments, Achillion could walk away with $53.4 million after expenses.

This latest biotech offering follows closely on those from Cadence Pharmaceuticals Inc. and Trubion Pharmaceuticals Inc., which raised $54 million and $52 million in their respective IPOs. Earlier this month, OctoPlus Technologies NV went public on the Euronext exchange to the tune of €20 million (US$25 million).

If just one of the 13 biotech companies in the IPO queue manages to price in the next three days, October will hold the 2006 record for the most biotech IPOs priced in a month. (See BioWorld Today, Oct. 19, 2006, and Oct. 26, 2006.)

Does that mean the IPO window is open? Thomas Dietz, Co-CEO of San Francisco-based investment bank Pacific Growth Equities LLC, said it's been "open but incredibly selective" for about three years now.

"We've seen a doubling in the last three months of the number of companies in registration, so we will see more companies try to get out, but the numbers should remain steady since not all of them will make it," Dietz said, adding that companies who meet the criteria for the current IPO window typically have late-stage products, a strong pipeline and enough near-term milestones to support their value in the aftermarket.

The three IPOs that priced on Nasdaq this month (Achillion, Cadence and Trubion) each raised more than the $45.7 million per deal average of biotech IPOs priced by the end of the third quarter, according to BioWorld Industry Snapshots. All three priced at the low end or below their initial ranges, but all are trading above their offering prices, which Dietz said shows that they are being priced correctly and being sold to investors who want to hold onto them.

Achillion (NASDAQ:ACHN) closed up 89 cents at $12.39 on its first day of trading.

Achillion executives declined to comment on the deal due to SEC regulations, but the company's prospectus states that proceeds from the IPO will be used to further clinical development of its infectious disease portfolio, as well as support research and development, working capital and other general corporate expenses.

Specifically, Achillion plans to allocate nearly half of the financing to completing Phase II and initiating Phase III trials with elvucitabine, a nucleoside reverse transcriptase inhibitor (NRTI) for HIV. While NRTIs are a component of the standard of care in HIV, they are limited by the development of drug-resistant disease strains, short half-lives that exacerbate drug resistance, and other factors. Elvucitabine has demonstrated antiviral activity against HIV strains that are resistant to frequently prescribed NRTIs and has a long half-life, which Achillion believes will differentiate it within the market.

In a completed Phase II trial, a once-daily 10-mg dose of elvucitabine for seven days resulted in a significant mean viral load reduction compared to placebo. If the ongoing Phase II trials pan out similarly, Achillion plans to begin Phase III in 2007.

A small percentage of the IPO proceeds will be used to support ACH-806 (also known as GS 9132), a small molecule with a novel mechanism of action that involves hepatitis C virus protease and inhibits HCV replication, yet is not a protease inhibitor. In a recently completed Phase I study, ACH-806 was found to be safe and well-tolerated, and data from a proof-of-concept study initiated in August are expected in the first quarter of 2007. After that, development responsibilities will be handled by partner Gilead Sciences Inc., who licensed exclusive worldwide rights to the drug for $10 million up front and up to $157.5 million in milestone payments, as well as royalties. (See BioWorld Today, Nov. 30, 2004.)

Achillion also plans to put about 20 percent of its IPO take toward finishing preclinical development and conducting clinical trials with ACH-702, a broad-spectrum antibacterial drug that targets DNA replication enzymes. In preclinical studies, ACH-702 exhibited potent antibacterial activity against recent methicillin-resistant Staphylococcus aureus strains, or MRSA. An investigational new drug application is slated for filing in the first quarter of 2007.

Achillion's 2005 net losses totaled $13.6 million, with $107.3 million accumulated deficit as of Jun. 30. After the offering, the company will have 14.8 million shares outstanding, which reflects a 1-for-8 reverse stock split completed Oct. 24.

Cowen and Co. LLC served as sole book-running manager for the offering, with CIBC World Markets Corp. acting as co-lead manager and JMP Securities LLC as co-manager.