Vertex Pharmaceuticals Inc. sold 11.75 million shares to raise gross proceeds of $152.8 million, the second highest amount of any biotech follow-on or initial public offering this year.
The offering comes just a month after the Cambridge, Mass.-based company reported positive Phase Ib data with its oral protease inhibitor, VX-950, for hepatitis C.
Vertex offered the shares at $13 each - a slight discount to the $13.19 stock closing price on Tuesday. The stock (NASDAQ:VRTX) rose 11 cents Wednesday to close at $13.30.
Vertex had filed earlier this month to offer 9.5 million common shares, expecting to price shares a bit higher; the stock at that time was trading at more than $14 a share. But with nine products in the pipeline, the company was able to raise more than originally expected, although lowering the price per share, placing the gross proceeds significantly north of almost all offerings conducted this year. Only San Diego-based Amylin Pharmaceuticals Inc.'s $202.4 million follow-on offering in January surpassed the amount raised by Vertex.
"There was a very strong institutional demand, which led to a larger-than-expected sizing of the deal," said Michael Partridge, director of corporate communications at Vertex.
According to the company's first-quarter results, it did not particularly need to raise money. As of March 31, Vertex reported $334.3 million in cash and cash equivalents. Following the offering, the company has nearly 93 million shares outstanding.
"We are in a strong financial position," Partridge said. He could not comment further on the offering due to an SEC-imposed quiet period.
Underwriters of the public offering include New York-based Merrill Lynch, Pierce, Fenner & Smith Inc. as the sole book-running manager, and JPMorgan Securities Inc. and UBS Securities LLC, both of New York, as co-managers. Vertex has granted the underwriters a 30-day overallotment option to buy up to about 1.8 million shares. If exercised in full, it would bring Vertex another $22.9 million in proceeds.
According to its prospectus, the company intends to use net proceeds for general corporate purposes, including working capital, research and development, clinical trials, and the acquisition of new technologies and investments.
Founded in 1989, Vertex's work has yielded two marketed protease inhibitors for HIV infection and AIDS. The first product, Agenerase, is being replaced in world markets by it second product, the prodrug Lexiva/Telzir. London-based GlaxoSmithKline plc markets both products.
Also in the viral disease space, Vertex is studying merimepodib (VX-497) in a Phase II for hepatitis C virus, VX-950 in a Phase I for the same indication, and VX-385 in a Phase II for HIV. Vertex holds worldwide rights to VX-497. VX-950 is partnered with Tokyo-based Mitsubishi Pharma Corp. for the Far East, and VX-385 is partnered with GSK for everywhere but the Far East.
Vertex investors particularly are excited about VX-950, following positive results from a Phase Ib trial presented at the Digestive Disease Week scientific conference in May. The company's stock surged almost 20 percent on data showing that patients receiving VX-950 for three days had a median reduction in HCV RNA of at least 1,000-fold in all three dose groups. (See BioWorld Today, May 11, 2005.)
Before the end of the year, Vertex plans to start a 14-day Phase Ib combination study with VX-950 and pegylated interferon, as well as a Phase II study of VX-950 administered as a monotherapy.
Aside from viral disease products, Vertex is working on three products for inflammatory and autoimmune conditions. VX-765 is in Phase II for psoriasis and other autoimmune diseases, and two other products, VX-702 and pralnacasan (VX-740), are in Phase II for rheumatoid arthritis and other diseases. The Phase II trial of VX-702 just began in May and will include about 300 patients with moderate to severe rheumatoid arthritis who will be treated for three months. The product is partnered in the Far East with Tokyo-based Kissei Pharmaceutical Co. Ltd. Vertex holds worldwide rights to VX-765 and VX-740.
A third area of focus for Vertex - oncology - rounds out the company's pipeline with three programs. VX-680 and VX-944 are in Phase I trials, while VX-322 is at the preclinical stage. Worldwide rights to all three of those programs belong to Whitehouse Station, N.J.-based Merck & Co. Inc.; Germantown, Md.-based Avalon Pharmaceuticals Inc; and Basel, Switzerland-based Novartis Pharma AG, respectively. The deal with Merck, signed last summer, is potentially worth $384 million. Vertex formed the $73 million deal with Avalon earlier this year, and Vertex has had an ongoing relationship with Novartis since 2000, when it signed a deal with a total value of $800 million to find targets in the protein kinase gene family. (See BioWorld Today, May 10, 2000; Feb. 5, 2004; June 23, 2004; and Feb. 16, 2005.)