By Charles Craig
Demand pushed Vertex Pharmaceuticals Inc.'s public offering up to 3 million, and at $45.50 per share, the $136.5 million raised is the most for a biotechnology company this year.
When Vertex, of Cambridge, Mass., registered for the equity financing last month, it proposed selling 2.5 million shares and its stock (NASDAQ:VRTX) was trading at slightly more than $51. Although the offering price slipped 11 percent, the company sold 500,000 more shares and, based on the $130.4 million in cash it had at the end of 1996, doubled those reserves. Following the offering, Vertex has about 24.1 million shares outstanding.
The company's stock ended Friday at $47.375, up 1.375
Underwriters were Cowen & Co.; Bear, Stearns & Co. Inc.; Robertson, Stephens & Co.; and J.P. Morgan & Co., all of New York. They have options to purchase another 450,000 shares to cover overallotments.
Vertex, whose lead product is an HIV protease inhibitor under development with Glaxo Wellcome plc, develops small molecule drugs based on the 3-D structure of protein targets. It reported a net loss of $40 million in 1996.
Vertex's AIDS drug, VX-478, is in Phase III trials. London-based Glaxo Wellcome markets the two best-selling AIDS drugs, AZT and 3TC, which are reverse transcriptase inhibitors and are being used in combination with protease inhibitors marketed by other companies.
In addition to the HIV protease inhibitor, Vertex has other small molecule compounds in clinical development. VX-710 is designed to prevent multi-drug resistance (MDR), a genetic mechanism in cancer cells that counters chemotherapy. It is under development in Canada with BioChem Pharma Inc., of Laval, Quebec.
A second MDR inhibitor, VX-853, also is in clinical trials to improve the effectiveness of cancer chemotherapy and VX-366, a butyrate compound, is under development for treatment of symptoms associated with blood disorders sickle cell anemia and beta thalassemia.
In addition to being the single highest public offering of 1997, Vertex's equity financing came close to equaling the total raised by biotechnology companies through the first two months of the year. Five companies, with either follow-on or initial public offerings, generated $169.5 million in January and February.
The sluggish start for the biotechnology sector in 1997 continued a trend that gripped the industry in the last half of 1996 following a record 12 months of equity financing activity.
However, Vertex's successful offering and a surge in the NASDAQ Biotech Index through January and February this year may signal a return of investor enthusiasm.
The NASDAQ Biotech Index began 1997 at 303.31, which was one point below where it started the year before, and by Feb. 21 reached a high for the first two months of 347.03, a 14 percent jump.
The index slipped during the next week to finish February at 339.61. But that figure still is higher than 1996's peak of 332.63 recorded in May, when biotechnology companies also raised nearly $1 billion in the most lucrative month during the industry's record-setting year — from June 1995 to June 1996 — for public offerings. (For more on biotech financing, see Monday's issue of BioWorld Financial Watch.)
Vertex completed its offering a week after it registered for the stock sale. Two other offerings proposed during the last week by Human Genome Sciences Inc., of Rockville, Md., and PathoGenesis Corp., of Seattle, also could generate significant funding.
Human Genome Sciences is offering 3 million shares. Based on the $42.50 price of its stock when it registered, the company would raise $127.5 million.
PathoGenesis is selling 2 million shares. It's stock at registration was trading at $30.25, which would generate $60.5 million. *