By Debbie Strickland

LeukoSite Inc., a five-year-old Cambridge, Mass., company, has completed its initial public offering (IPO) of 2.5 million shares, though at a price one-third lower than that estimated when the registration was filed in late June.

Originally expected to generate $8 to $10 per share, the shares were priced at $6 each — the lowest of any biotech IPO this year — and are now trading on NASDAQ's National Market (LKST). The shares closed Tuesday at $6.125, unchanged.

The company now has 9.15 million shares outstanding.

The offering generated $15 million, with net proceeds to the company of $13.35 million. An underwriters overallotment option for 375,000 shares could raise net proceeds to $15.44 million.

Hambrecht & Quist L.L.C. and UBS Securities, both of New York, were the underwriters.

LeukoSite's results are in line with a market that has not exactly thronged to biotechnology IPOs lately. Only about a dozen have closed this year, half the rate of biotech's bull market from July 1995 to June 1996, when 48 closed. Still, two IPOs that closed this month — Aviron, of Mountain View, Calif., and Hyseq Inc., of Sunnyvale, Calif. — were the No. 1 and No. 3 grossing offers of the year to date.

However, for every Aviron — which launched its IPO in the wake of headline-making Phase III trial results for a nasal spray flu vaccine — there's a company somewhere whose withdrawn prospectus is in the recycling bin. Since June 1996, about a dozen biotechnology companies have withdrawn IPOs.

Aviron has achieved the highest IPO gross so far in 1997, with $65 million, followed by Biora A.B. (an international offering), of Malmo, Sweden, with $57.8 million; Hyseq Inc., with $42 million; and Aurora Biosciences Corp., La Jolla, Calif., with $41.5 million. The lowest grossing IPOs were those of LeukoSite; Antivirals Inc., of Corvallis, Ore., with $20.7 million; and Aastrom Biosciences Inc., of Ann Arbor, Mich., with $22.8 million. (See BioWorld Financial Watch, Aug. 4, 1997, for a complete wrap-up of IPOs in the first half of 1997.)

LeukoSite's capital infusion boosts the company's available cash to approximately $25 million from $11.6 million as of June 30. The proceeds, along with existing capital resources, interest income and revenue from collaboration agreements, should see the company through early 2000, according to an amended prospectus.

LeukoSite reported a net loss of $3.7 million during the first half of 1997, with research and development expenses of $5.45 million and revenues of $2.28 million.

The company's science centers on leukocytes' distinctive surface molecules and their roles in disease. The company is developing monoclonal antibodies and small-molecule drugs that selectively deplete leukocytes or block specific leukocyte recruitment pathways controlled by chemokines and their receptors, as well as by integrins and adhesion molecules. Altogether, LeukoSite has three drug candidates and seven small molecule drug discovery programs.

The IPO followed two collaboration agreements inked this year, one with Genzyme Corp., also of Cambridge, and the other with ILEX Oncology Inc., of San Antonio.

Genzyme agreed to provide the company with access to more than 800,000 compounds, with the possibility of a follow-on research collaboration if LeukoSite finds any promising drug leads.

With ILEX, the company has formed a joint venture to develop a chronic lymphocytic leukemia treatment dubbed LDP-03, a humanized lymphocyte-depleting monoclonal antibody directed against the CD52 surface antigen expressed on lymphocytes but not on hematopoietic stem cells. The drug is heading for late-stage clinical trials in 1998, according to LeukoSite.

The company also is preparing for a clinical trial of LDP-01, a humanized anti-integrin monoclonal antibody that inhibits early leukocyte recruitment and inflammation resulting from reperfusion injury. Two U.K. Phase I/IIa clinical trials are slated to begin by early 1998, one for kidney transplantation and one for thrombotic stroke.

A third drug candidate, LDP-02, is a humanized monoclonal antibody to the a4b7 integrin. The drug is in preclinical development as a treatment for inflammatory bowel disease.

To help fund a small molecule drug discovery program focusing on chemokine receptors, LeukoSite has partnered with three big pharma companies: Warner-Lambert Co., of Morris Plains, N.J., Roche Bioscience, of Palo Alto, Calif., and Kyowa Hakko Kogyo Co. Ltd., of Tokyo. These companies have paid LeukoSite a combined $5.1 million out of $21.4 million pledged for research support and license fees. Potential milestone payments total $44.3 million.

Warner-Lambert and Roche have also made equity investments of $9 million and $3 million respectively. *

Editor's Note: Aviron's public offering was a follow-on offering. Additional initial public offerings that should be mentioned here are those of Transcend Therapeutics, Inc., which grossed $18 million, followed by Progenitor Inc., which grossed $19.3 million. Progenitor's shares were priced at $5.625 each, although they were sold packaged in units of $7 each, consisting of both shares and warrants. *