[Updated: 4:40 pm Eastern, 3/12/10] Aveo Pharmaceuticals is proving once again that IPO investors have a limited appetite for biotech companies. The Cambridge, MA-based developer of cancer drugs sold its initial public shares to investors last night at $9, a long shot from its hoped-for range of $13 to $15.
The company (NASDAQ: [[ticker:AVEO]]) started trading today, and dropped by a penny to close at $8.99. Aveo, which has no products currently on the market, will rake in $81 million for its R&D programs by selling 9 million shares to public investors, according to Renaissance Capital. That means with 29.6 million shares outstanding, Aveo now has a market valuation of about $267 million. JP Morgan and Morgan Stanley were the deal’s lead underwriters. The underwriters have 30-day options to buy another 1.35 million shares.
The lack of a bidding frenzy for Aveo is really just the latest sign of lackluster interest in biotech from public investors. Cambridge, MA-based Ironwood Pharmaceuticals (NASDAQ: [[ticker:IRWD]]) was first out of the gate this year, when it priced its IPO at $11.25, below its goal of $14 to $16. Later that month, Hayward, CA-based Anthera Pharmaceuticals cut its IPO price in half, settling for $7 a share. And San Diego-based Trius Therapeutics was the on the verge of going public when it postponed its deal earlier this month, saying it had to reconsider some new FDA clinical trial protocol.
Still, the Aveo IPO will give its venture capitalists and employees some reason to celebrate, if not to party like it’s 1999. The top five shareholders in the company, according to the most recent IPO prospectus, are Cambridge, MA-based Biogen Idec (10.4 percent), MPM Capital (8 percent), Highland Capital Partners (7.4 percent), Venrock Associates (6 percent), and Prospect Venture Partners (5.8 percent). Aveo CEO Tuan Ha-Ngoc should have a 3 percent stake in the company after the offering. These numbers are probably a bit off, because they were based on the assumption that Aveo would sell 7 million shares in its IPO, when it actually sold 9 million at a lower price than forecast.
Much of the money will go toward the final stage of clinical trials for tivozanib (or AV-951) for kidney cancer. That drug showed some impressive clinical trial results at last year’s meeting of the American Society of Clinical Oncology, suggesting it may be able to stack up well against a couple of tough competitors in Pfizer’s sunitinib (Sutent) and Bayer and Onyx Pharmaceuticals’ sorafenib (Nexavar). Aveo, founded in 2002 based on science from the Dana-Farber Cancer Institute in Boston, has become known for what it says is a more accurate method for mimicking cancer in mouse experimental models, compared with the traditional “xenograft” approach. Merck, Eli Lilly, OSI Pharmaceuticals, and Biogen Idec have all used the technology as part of their drug discovery efforts.
