It’s been a long time coming, but well worth the wait.
Ribapharm Inc., having filed for its initial public offering in June 2000, got the deal done Friday, pricing 26 million shares at $10 apiece, raising $260 million and entering biotechnology’s IPO record book.
The amount shouldn’t be surprising. Costa Mesa, Calif.-based Ribapharm is different than most biotechnology first-timers it’s a spin-off from ICN Pharmaceuticals Inc., it has an established product on the market and it’s profitable.
“This is very exciting,” Ribapharm CEO Johnson Lau said, speaking from New York where Friday Ribapharm closed trading at the New York Stock Exchange. “This is the largest biotech IPO in history, if you consider Genentech [Inc., of South San Francisco] was actually a second offering.”
Genentech, an independent company, in essence became a subsidiary of Roche Holding Ltd. when Roche purchased half of Genentech’s stock for $492 million. Genentech was spun back out in July 1999 in what was actually the company’s second initial public offering. The IPO raised about $1.9 billion through the sale of 20 million shares at $97 per share, not including overallotments. (See BioWorld Today, July 21, 1999.)
Ribapharm’s history is similarly intricate. Its parent, ICN Pharmaceuticals, decided in June 2000 to split its operations into three entities; Ribapharm was to be the research and development company. In August 1999, the company set its number of shares at 18 million and its share price between $13 and $15. Various events, including a tight IPO market, kept Ribapharm out of the public’s hands for all of 2001, but in January 2002 it increased its number of shares proposed in the offering to 20 million. In March, it again increased the share number, adding another 6 million and reaching the 26 million shares that sold Friday at $10 each.
Although beneath the expected range, the $260 million was raised in a bear market, Lau said.
“Certainly, the market is very challenging, and, given that, we think this is an appropriate place to start,” Lau said. “We’ve had positive feedback from the financial community.”
Ribapharm shares, trading under the NYSE symbol RNA, closed Friday at $10.80.
The company had 150 million shares outstanding before the offering and underwriters have an overallotment option on additional shares. If the option is exercised in full, the offering would constitute 19.9 percent of outstanding shares, thus reducing ICN’s stake in Ribapharm to just over 80 percent, Lau said. ICN will see all the proceeds from the IPO and plans to distribute the rest of the Ribapharm shares to its shareholders within six months.
Ribapharm’s approved product, ribavirin, is an antiviral drug for the treatment of hepatitis C. It is marketed in the U.S., the European Union and Japan by Schering-Plough Ltd., a unit of Schering-Plough Corp., of Madison, N.J. The drug is marketed in combination with Schering-Plough’s interferon alfa-2b and its pegylated interferon alfa-2b. Ribapharm received $139 million through royalty payments in 2001 from sales, and expects more, Lau said.
After the launch of the pegylated interferon alfa-2b last year, a launch Lau called “explosive,” Ribapharm earned $55 million in royalties during the fourth quarter. Throw in “full-year revenues” in 2002 from Japan, a country with about 2 million people afflicted with hepatitis C, and Lau said analysts “are projecting substantially higher royalties” from ribavirin in the future.
With this positive cash flow, Ribapharm can fund its own research and development activities a luxury in biotechnology. Behind ribavirin, the company has two compounds Levovirin and Viramidine, both similar to ribavirin in its pipeline. It began Phase I trials of Levovirin in the U.S. in February 2001 and in June licensed the product to F. Hoffmann-La Roche Ltd. In September, it initiated Phase I trials of Viramidine in Europe and has filed an investigational new drug application to begin Phase I work on Viramidine in the U.S.
Also, the company “licensed interleukin-12 from Roche and is testing it in combination with anticancer drugs against colon cancer,” Lau told BioWorld Today.
ICN Pharmaceuticals has had troubles with a dissident group of shareholders during the company’s splitting. Just how ICN moves forward from here is not clear, but that is not Lau’s concern.
“The issue, as far as I’m concerned, is concentrating on Ribapharm and bringing this company to its best,” he said. “This is a new chapter in our corporate history. We are committed to focusing on [the antiviral and anticancer] areas. In biotechnology, focus is the key.”
Underwriters for the offering are UBS Warburg LLC, of Stamford, Conn., which is leading the offering; CIBC World Markets Corp., of New York; and SG Cowen Securities Corp., of New York.