Advanced Life Sciences Holdings Inc. priced its initial public offering, raising $32 million and continuing a trend of lower-than-expected IPOs for 2005.

The Woodridge, Ill.-based company is selling about 6.4 million shares at a price of $5 per share. That is lower than the estimated price range of $8 to $9 set in July, which would have raised about $42 million, and it is well below the $86 million anticipated when the company first announced plans to go public in late April. (See BioWorld Today, May 2, 2005.)

Representatives of Advanced Life Sciences could not be reached for comment.

On the first day of trading, the company's shares (NASDAQ:ADLS) rose $1 to close at $6.

In the recent IPO market, Advanced Life Sciences' story is a familiar one. Of the 19 companies that went public in the first half of the year, the majority priced significantly lower than they'd wished, raising an average of $50.8 million. Things haven't looked much better so far in the second half - only one company went public in July, the Australian firm EvoGenix Ltd., which raised A$9 million (US$6.9 million).

In such a daunting market, what drives a company to take on the IPO challenge?

Stuart Collinson, of investment firm Forward Ventures in San Francisco, said that "people are looking at what their options are in the private market, compared to where they might be in the public market. In some cases, although the price may be less than they want, and the amount of money may also be less than they want, they decide it's a better option than doing another private round."

It also might simply be a matter of necessity. Advanced Life Sciences, which has relied solely on debt and capital contributions by its founder, Michael Flavin, of Woodridge, Ill.-based Flavin Ventures LLC, and borrowing on credit, had about $40,000 in cash as of June 30. It had total combined assets of $1.8 million, and had accumulated a deficit of $41.9 million, related to the development of its early stage pipeline of infectious disease, inflammatory and oncology drugs.

While the $32 million from the IPO is below what Advanced Life Sciences had hoped, what it does is provide access to the public markets. Through the end of July, follow-on efforts have averaged about $73.8 million.

A bigger follow-on isn't a given, though, and Collinson warned that that route requires "some good news flowing or some significant event." Otherwise, trying for another public round can "be devastating to your stock price and you find yourself in a situation where you have little public interest in the company."

One company that recently took advantage of public interest is Cambridge, Mass.-based Momenta Pharmaceuticals Inc., which amassed $130 million by selling 4.8 million shares at $27.02. Momenta, which went public last June, selling 6.2 million shares for $6.50 apiece, has watched it stock climb steadily since, including a 62 percent jump earlier this summer on promising news regarding its low-molecular-weight heparin. (See BioWorld Today, July 25, 2005.)

"I believe the public market to be fairly discriminating, though it is possible to get companies out," Collinson said, adding that a company in his firm's portfolio, Predix Pharmaceuticals Inc., recently filed for an IPO. Predix, based in Lexington, Mass., anticipates raising as much as $70 million. (See BioWorld Today, Aug. 5, 2005.)

It's difficult to say whether the IPO market is going to improve, Collinson said, but for life sciences, "this is not a case where the market is shut, when no company can get out. I think there is an IPO window for some, but [they] need to think very carefully about going out."

In its prospectus, Advanced Life Sciences said it expects about $18.5 million of the net proceeds to support Phase III trials of cethromycin - a ketolide antibiotic - in mild to moderate community-acquired pneumonia. The company licensed worldwide rights, excluding Japan, to cethromycin and a second-generation drug, ABT-210, from Abbott Park, Ill.-based Abbott Laboratories in December 2004. About $8 million of the proceeds are expected to be paid to Abbott as part of the agreement, with an additional $4 million for the initiation of the pivotal trials of cethromycin.

Funds also will be used to repay about $3.2 million outstanding under the company's bank line of credit, with remaining money being used for general corporate purposes.

The company has four other products in or ready to begin clinical development, including ABT-210, another ketolide antibiotic that could be administered intravenously.

The company's ALS-886, is set to enter clinical development for the treatment of inflammation-related tissue damage, and the FDA recently approved an investigational new drug application for ALS-357, a topical cream designed to treat patients with malignant melanoma.

Calanolide A, an HIV treatment, is in development through Sarawak MediChem Pharmaceuticals Inc., a joint venture with the government of Sarawak, Malaysia. That compound has completed Phase I testing and is expected to begin evaluation in a Phase IIa trial. The company has ongoing preclinical work in HIV, Alzheimer's disease and cancer.

Along with its public offering, Advanced Life Sciences concurrently offered 600,000 shares directly to a company shareholder in exchange for a $3 million reduction of a milestone payment under a license agreement.

Before the offering, Flavin Ventures, the company's principal stock holder, owned about 88 percent of the company. After the offering, the investment firm will hold about 60 percent. The company will have about 16 million shares outstanding.

New York-based C.E. Unterberg, Towbin LLC is acting as the sole bookrunner and joint lead manager for the offering, while ThinkEquity Partners LLC, of San Francisco, is acting as the co-lead manager, and Merriman Curhan Ford & Co., also of San Francisco, is acting as co-manager.

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