By Matthew Willett
Applied Molecular Evolution Inc. (AME) on Thursday priced its initial public offering of 4.65 million shares at $19 per share, generating $88.35 million for the 11-year-old company.
The San Diego-based company initially sought $85 million in the IPO, and increased the offering size by about 900,000 share on Wednesday night. It now has 22.67 million shares outstanding. CIBC World Markets is lead manager for the offering, and PaineWebber Inc. and SG Cowen Securities Corp. are co-managers. They have an option to purchase 697,500 shares to cover overallotments.
Like several recent IPOs, the first-day response was strong. AME's stock (NASDAQ:AMEV) closed at $30.875, up $11.875, or 62.5 percent. The stock traded as high as $36.94, nearly twice the offering price.
"We're just very gratified that the market recognized the value of the company and the focus of directed evolution and it's value for therapeutics production," Lawrence Bloch, CFO and vice president of business development, said.
Company officials said the IPO proceeds are marked for general corporate operations and internal development projects. Bloch said he's "very comfortable" that proceeds will fund operations for two years.
If the overallotment option is exercised, AME would gross more than $101 million, giving the company about $110 million in cash.
AME uses its directed evolution technology, AMEsystem, to develop novel human therapeutics and improve currently marketed drugs. AMEsystem selectively replaces single amino acids in target proteins, evaluates the resulting protein for improvements and combines positive changes until an optimized protein is produced.
The company currently has collaborations with MedImmune Inc., of Gaithersburg, Md., and Bristol-Myers Squibb Co.(BMS), of New York, to develop improved compounds.
In its collaboration with MedImmune, begun in 1999, AME increased affinity 90-fold for Vitaxin, an antiangiogenic monoclonal antibody designed for tumor treatment. AME licensed Vitaxin to MedImmune in return for a $4.15 million equity investment, milestone payments and royalties.
AME has agreed to apply its technology to three other compounds in the MedImmune agreement. (See BioWorld Today, May 15, 2000, p. 1.)
Through two agreements with Bristol-Myers, AME received more than $27 million for optimization and other work, and stands to receive further milestone payments and royalties. Application of AME technology reduced the risk of side effects for BMS' anti-CD40 antibody, a monoclonal antibody designed for the treatment of graft-vs.-host disease caused by organ transplant rejection. AME said it increased the affinity of this target by 500-fold.
The improved version, dubbed hBR96, was licensed to Seattle Genomics Inc., of Bothell, Wash., for use in developing treatments for various cancers. The licensing agreement includes milestone payments and royalties for AME in connection with commercialization of the product.
Bloch said the company expects to see milestone and royalty payments in connection with these collaborations within the next 12 to 18 months. Those payments are contingent on product advancement to clinical trials and commercialization, he added.