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Strong IPO market a boon to biotechs, but change is in the air

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For PTC Therapeutics, a strong IPO has helped raise capital to expand overseas clinical trials, says Stuart Peltz.
For PTC Therapeutics, a strong IPO has helped raise capital to expand overseas clinical trials, says Stuart Peltz. - ()

PTC Therapeutics Inc. CEO Stuart Peltz describes his company's lead drug candidate as one that changes a period into a comma.
And the company hopes ataluren — designed to treat certain cases of muscular dystrophy and cystic fibrosis — translates into dollar signs for investors and the bottom line of PTC, a South Plainfield biotech that recently completed an initial public offering in which it raised $144.4 million.

While few other early-stage biotechs might liken their products to punctuation, what they share with PTC is a healthier IPO market that, experts say, is making now an ideal time to go public. But that might not be the case much longer.

PTC's ataluren targets genetic diseases caused by what is known as nonsense mutation — a rare sequence that prematurely stops production of a protein, “almost like putting a period in the middle of a sentence,” Peltz said. “So you truncate the sentence, and therefore don't know what it means.”

Ataluren is designed to help the body resume development of a full-length protein, creating healthier muscles. Thus, the comma analogy.

Genetic diseases like those targeted by PTC's drug are uncommon. About 13 percent of muscular dystrophy cases and 10 percent of cystic fibrosis cases in the United States directly result from nonsense mutation. So the fact that ataluren enjoys orphan drug status — a federal designation providing grants, fee exemption and tax breaks — is a help, but it pales to the June IPO, which will help the company fund clinical trials around the world.

Capital markets have percolated with more offerings from early-stage biotechs. A report by IPO research firm Renaissance Capital LLC said through the first half of 2013, 16 U.S.-listed biotech IPOs raised $1.1 billion in proceeds, putting this year on pace to be the strongest since 2004.

PTC also benefited from the JOBS Act, or Jumpstart our Business Startups, a federal law that eases disclosure and other paperwork requirements for emerging companies seeking to go public.

PTC's offering was the largest among New Jersey life science companies going public in 2013; it also raised $65 million privately from Bain Brookside Capital. Shane Kovacs, PTC's chief financial officer, said its timing benefits from “equity markets (that) have become much more favorable over the last two years.”

Other IPO highlights: Omthera Pharmaceuticals, in Bedminster, which raised about $64 million in an April offering, down from an earlier target of $75 million, and Cancer Genetics, in Rutherford, which raised $6.9 million in an April offering. Omthera was sold to AstraZeneca for $323 million following its IPO.

Andrew Gilbert, a partner at DLA Piper, a Florham Park law firm that advises the life sciences industry, said the IPO rush partly reflects companies with interesting prospects. He said it also reflects the desire among investors to put cash back to work after sitting on the sidelines following the financial crisis.

“It's being driven by capital on the sidelines,” said Gilbert, whose firm handles IPO activity and mergers and acquisitions.

Less clear is whether the rally is sustainable. Gilbert said rising equity markets are bound to correct, as broad economic trends still show a slow, uneven recovery. When those two trends connect, expect a pullback in the capital markets.

“It's starting to slow down,” Gilbert said. “That's going to have an impact on IPOs, and that has a trickle-down effect on the whole food chain.”

E-mail to: tomz@njbiz.com
On Twitter: @biztzanki

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