Peter Hecht is finally able to speak to the press about Ironwood Pharmaceuticals‘s landmark initial public offering, breaking the silence he was required to keep until last week to comply with quiet-period rules. And the CEO of Cambridge, MA-based Ironwood gave Xconomy a front-row perspective on the most talked about biotech IPO in recent history.
Ironwood (NASDAQ:[[ticker:IRWD]]), based on the promise of its lead drug linaclotide for chronic constipation, raised $203 million in its maiden public offering last month—a rare feat for biotechs nowadays, in light of public investors’ general aversion to the risky deals. The question of how Ironwood succeeded where many previous biotechs attempting IPOs have failed is likely to be discussed in industry circles and business schools for years.
Hecht shed some light on that big question during an hour-long interview yesterday afternoon. The founding chief executive of Ironwood began by hitting some familiar notes on his management philosophy, mainly that his firm has taken a long-term view on the biotech business and works first in the interest of its investors. While those may sound like the cornerstones of any business strategy, the way Hecht and his team have put them into practice over the past dozen years have made Ironwood into one of only a handful of Massachusetts-based biotechs worth more than $1 billion.
According to Hecht, Ironwood was fortunate to have already met many of the major institutional investors focused on healthcare before it launched the road show for its first public offering last year. This meant that some of the investors were already well acquainted with the company before hearing Hecht and his colleagues’ IPO pitch. Also, four of the large public equities buyers that participated in the firm’s IPO were previous investors in the company, which had raised more than $300 million in private financings before filing papers in November 2009 to go public. “They knew what they were getting into,” Hecht says.
Ironwood’s ability as a private company to raise money from traditionally public investment outfits—including Ridgeback Capital, Morgan Stanley Investment Management, Jennison, Maverick Capital, and Invus—helped the firm support its operations for the past five years without having to do an IPO. (Fidelity Biosciences, Polaris Venture Partners, and Venrock Associates were venture backers of Ironwood.) As Hecht notes, the company probably wouldn’t have been able to raise as much as it did in its IPO without the support of those investors as it advanced linaclotide to its current pivotal phase. During the past three years, the firm has also found partners to help commercialize linaclotide around the world: New York-based Forest Laboratories (U.S.); Spain’s Laboratorios Almirall (Europe); and Japanese drug-maker Astellas Pharma (Asia).
Indeed, the main attraction to Ironwood is linaclotide, which was the subject of utmost interest to investors during the firm’s IPO road show. The firm reported late last year that the drug passed two pivotal trials as a treatment for chronic constipation, and in the second half of this year the company is expected to deliver results of two more pivotal trials of the drug for treating constipation relate to irritable bowel syndrome. The company has estimated that up to 46 million Americans suffer from these conditions, and existing treatments haven’t been able to fully alleviate the abdominal pain and other symptoms these people experience. So the market for the firm’s experimental drug is significant.
“Back in July of last year when we started thinking about doing this [IPO], there was a general sense that this was a very good
