By Mary Welch
Despite slashing its proposed opening price, Praecis Pharmaceuticals Inc. raised $80 million in its initial public offering (IPO).
The Cambridge, Mass.-based company sold 8 million shares at $10 each. It originally had set the anticipated price range between $15 and $17. At the time of its registration, the company said it hoped to raise $156.4 million.
"We're quite pleased with this offering because it achieved our strategic objectives of going public as well as raising enough money to meet our strategic needs," said Praecis CEO Malcolm Gefter. "The price of the stock is the price people are willing to pay and I'm sure the stock will find its level in the marketplace all in due time. We are no different in our value from when we filed back in February."
Salomon Smith Barney Inc., CIBC World Markets Corp. and Credit Suisse First Boston Corp., all of New York, served as underwriters. Praecis granted the underwriters an option to purchase another 1.2 million shares to cover overallotments.
Praecis' stock (NASDAQ:PRCS) closed Thursday at $11, up $1.
The company originally filed for an IPO in the summer of 1998. However, it was withdrawn after the Asian market crashed, Gefter told BioWorld Today in an earlier interview.
Praecis, a profitable biotechnology company, intends to use the proceeds for the production of abarelix, which is in Phase III trials for treating hormonally responsive prostate cancer, to fund other trials, and to fund a new facility and other clinical and preclinical testing.
"We have been profitable for the last three years," Gefter said. "We have been accumulating cash and with our collaboration with Amgen and this public offering, we will have enough money to perfectly meet our needs, which include having four clinical programs ongoing this year."
Abarelix is a gonadotropin-releasing hormone (GnRH) antagonist, designed to quickly reduce testosterone levels. Once called PPI-149, abarelix also can be referred to as an inhibitor of luteinizing hormone releasing hormone.
In March 1999, Praecis entered into a $100 million collaboration with Amgen Inc., of Thousand Oaks, Calif., to develop and commercialize abarelix. Amgen, which is covering all of Praecis' expenses for abarelix, gained rights to all human indications in North America, Australia, Asia and certain other markets. Praecis retained the responsibility for conducting clinical studies as well as for manufacturing. Last year Amgen paid Praecis $56.8 million under that agreement. (See BioWorld Today, March 11, 1999, p. 1.)
So far, abarelix has been tested in about 1,000 patients with prostate cancer at more than 100 centers. According to the prospectus, Praecis believes abarelix could become a $2 billion drug worldwide for prostate cancer. The company expects to file a new drug application (NDA) by the end of the year.
In addition, Praecis is developing another formulation for abarelix for the treatment of diseases in women that can be addressed by lowering estrogen levels. Now in Phase II/III trials, abarelix-depot-F is being tested on women with endometriosis. The second pivotal trial should start by the end of the year "with the NDA filed as soon as possible after that," Gefter said.
Praecis also is collaborating on abarelix with Synthelabo, of Paris, which has the rights to Europe, Latin America, the Middle East and certain African countries. The deal was initially valued at $78 million. (See BioWorld Today, June 6, 1999, p. 1.)
Earlier in the year, the company said it would work with Human Genome Sciences Inc., of Rockville, Md., for small-molecule drug discovery. Praecis will screen two HGS targets to identify novel small-molecule drugs to combat metabolic disorders and infectious diseases.
Founded in 1993, the company reported year-end 1999 revenues of $61.5 million and a net income of $9.2 million. As of Dec. 31, the company had $94.5 million in cash.