With the summer slump in biotechnology stocks a fading memory,two Massachusetts companies, Arqule Inc. and TranskaryoticTherapies Inc., benefited from a fall revival of investor interest andcompleted successful initial public offerings (IPO) that raised acombined $67 million.
Demand for shares of Medford, Mass.-based Arqule, a combinatorialchemistry company, pushed its IPO to 2.5 million shares _ 500,000more than anticipated. The offering was priced at $12 per share,midway in the projected range of $11 to $13, and generated $30million.
Transkaryotic, which is challenging the industry's top tier companiesfor a share of their lucrative therapeutic protein markets, priced its2.5 million-share IPO at the top end of the anticipated $13 to $15range, generating $37.5 million for the Cambridge, Mass., firm.
The strong IPOs followed a dismal drop in biotechnology publicofferings through the summer and early fall, hitting a new low inSeptember. The $39 million raised in that month by one IPO and onefollow-on offering was the lowest since July 1995. (See BioWorldFinancial Watch, Oct. 7, 1996.)
The slump, however, was preceded by a record-setting spring inwhich 24 firms went public and 36 others staged follow-on offeringsfor a combined $2.5 billion. Based on those figures, most forecastsfor a post-Labor Day resurgence were encouraging.
When Arqule registered for its IPO in late August, the companyalready had ongoing collaborations with three pharmaceutical firms_ Solvay Group, of Brussels, Belgium; Abbott Laboratories, ofAbbott Park, Ill.; and Pharmacia Biotech AB, of Uppsala, Sweden, asubsidiary of Pharmacia & Upjohn, of Kalamazoo, Mich. (SeeBioWorld Today, Sept. 3, 1996, p. 1.)
In late September Arqule entered an agreement with AuroraBiosciences Inc., of La Jolla, Calif., to take advantage of itsmammalian cell screening technology to assess the activity of small-molecule compounds generated by Arqule's combinatorial chemistrytechniques.
In Arqule's combinatorial chemistry approach, the company developsnon-peptide, non-nucleotide organic building blocks, which are basedon a targeted binding site and used to generate libraries of potentialdrug candidates. The technology is applicable not only to drugdiscovery, but also drug delivery, separations and diagnostics.
Following Arqule's IPO, the company has about 9.5 million sharesoutstanding. As of June 30, 1996, Arqule had $6.4 million in cashand reported a net loss of $754,000 for the first six months of theyear.
Underwriters Hambrecht & Quist LLC and Oppenheimer & Co. Inc.,both of New York, and Vector Securities International Inc., ofDeerfield, Ill., have options to purchase another 375,000 shares.
Arqule's stock (NASDAQ:ARQL) debuted Thursday and closed at$13.375.
Transkaryotic registered for its IPO in late August. Following theoffering the company has 16.7 million shares outstanding. As of June30, 1996, Transkaryotic had $28.8 million in cash and reported a netloss of $6 million for the first six months of the year. (See BioWorldToday, Aug. 30, 1996, p. 1.)
Its stock (NASDAQ:TKTX) closed Thursday on the first day oftrading at $15.
Underwriters Morgan Stanley & Co. Inc., and UBS Securities, bothof New York, and Pacific Growth equities Inc., of San Francisco,have options to purchase another 375,00 shares to coveroverallotments.
Transkaryotic's major corporate partner, Hoechst Marion RousellInc., of Frankfurt, Germany, is supporting development of theformer's gene activation technology, which is being applied toproduction of established therapeutic proteins _ such aserythropoietin (EPO), insulin, growth hormone, and tPA. Thoseproteins, all protected by patents, generated nearly $7 billion in salesworldwide in 1995.
Transkaryotic said it avoids intellectual property restraints on thedrugs by activating genes in human cells to produce the proteinsrather than manufacturing them by introducing cloned human genesinto bacterial, yeast or non-human mammalian cells.
The first protein to enter clinical trials in the Transkaryotic andHoechst collaboration will be EPO in 1997. EPO was developed byAmgen Inc., of Thousand Oaks, Calif., which has patents on itsrecombinant version and sells the red blood cell booster in the U.S. totreat anemia in kidney dialysis patients.
Hoechst, whose agreement with Transkaryotic includes anotherundisclosed protein, has paid its partner $42 million over the last twoyears. The collaboration on the two products could be worth up to$125 million to Transkaryotic in license fees, equity investments,milestone payments and research funds. In addition, Hoechst agreedto buy $5 million worth of Transkaryotic stock at the IPO price.
If Transkaryotic's technology works, Wall Street analysts suggestedthe company's competition with Amgen and other firms could end upin court in protracted patent disputes before it's played out on themarket.
Transkaryotic's other major program is gene therapy in which apatient's cells are modified ex vivo with DNA to produce a targetedtherapeutic protein and reinfused, generating production of theprotein for extended periods. n
-- Charles Craig
(c) 1997 American Health Consultants. All rights reserved.