Facebook Twitter LinkedIn Google Plus RSS

Lessons in going public: For biotech firms, getting listed on the stock market can be quite an adventure, albeit a lucrative one

By ,
Kathy Bloch, chief financial officer, CytoSorbents.
Kathy Bloch, chief financial officer, CytoSorbents. - ()

Like any other public biotech firm, CytoSorbents has photos of its team gathered for the Nasdaq Stock Market opening bell ringing, with everyone grinning in earnest.

It’s a moment both simple and exciting. What goes into a company being there is neither of those.

And the paths companies take to get there — which no one doubts the importance of in the life sciences industry — are almost never the same.

Monmouth Junction’s CytoSorbents already had gone public on an over-the-counter market, and not an actual exchange like the Nasdaq. In December 2016, the company decided to do what’s called an uplift.

“It brought us to the same place, the Nasdaq,” Kathy Bloch, chief financial officer at CytoSorbents, said. “But we had to do a lot, including realigning our board of directors to have audit and financial expertise and take care of various corporate governance matters.”

CytoSorbents needed it — having access to capital was crucial to help the company move forward with getting FDA approval and commercializing its blood purification technology.

“We were on a lesser-known exchange that’s not perceived as a gold standard for investors,” Bloch said. “In fact, some funds are precluded from investing in it.”

Lessons in going publicFor biotech firms, getting listed on the stock marketcan be quite an adventure, albeit a lucrative oneBy BRETT JOHNSONLike any other public biotech firm, CytoSorbents has photos of its team gathered for the Nasdaq Stock Market opening bell ringing, with everyone grinning in earnest.It’s a moment both simple and exciting. What goes into a company being there is neither of those.And the paths companies take to get there — which no one doubts the importance of in the life sciences industry — are almost never the same.Monmouth Junction’s CytoSorbents already had gone public on an over-the-counter market, and not an actual exchange like the Nasdaq. In December 2016, the company decided to do what’s called an uplift.“It brought us to the same place, the Nasdaq,” Kathy Bloch, chief financial officer at CytoSorbents, said. “But we had to do a lot, including realigning our board of directors to have audit and financial expertise and take care of various corporate governance matters.”CytoSorbents needed it — having access to capital was crucial to help the company move forward with getting FDA approval and commercializing its blood purification technology.“We were on a lesser-known exchange that’s not perceived as a gold standard for investors,” Bloch said. “In fact, some funds are precluded from investing in it.”CytoSorbents ended up raising capital on three occasions in relation to taking the company public, giving it the resources to continue down the path of bringing its product to local markets.Bloch, who was named NJBIZ’s CFO of the Year in 2016, stood in at a recent event held by the EDA as a case study in what taking a biotech company public can look like.But there’s no pinning down exactly what the experience of a company will end up being, as Kathleen Coviello, director of the Technology & Life Sciences Division of the EDA, reiterated.“The takeaway from (that panel discussion) was that there’s no set road map for any one biotech company — each financing vehicle has pros and cons,” she said. “But, in any case, there’s a lot involved in taking a company public, between the roadshow, garnering support and the transparency involved. “It’s not for the light of heart.”There’s also no telling where it can lead a company, as former Celator Pharmaceuticals CEO Scott Jackson can attest to.It was back in 2012 that Jackson’s company was privately held, but had completed a pair of phase two clinical trials on a candidate for blood cancer treatment that it wanted to have the resources enough to proceed to another phase with.“The best bet for us was to take the company public,” he said. “We decided to not go the traditional IPO route, and instead become a public reporting company and do private placement financing in addition to that.”When the New Jersey company’s leaders were confident enough in addressing Nasdaq reporting requirements, it also uplifted to become a public company. While it did attract institutional investors, the visibility also brought a proposal for an acquisition from Jazz Pharmaceuticals. The company, which in 10 weeks had grown its stock from around $1 per share to $30 per share, ended up being acquired by Jazz for about $1.5 billion.“Everyone always looks at how quickly that seemed to have happened and says, ‘Wow, how fantastic’ — and it was — but they don’t realize that there were 16 years that came before that at the company,” Jackson said.Jackson said years went into thinking about the right course of action for getting to the point the company was at right before its valuation skyrocketed and it was acquired.“Every company has to decide what the best course is to go public for them,” he said, adding that, without doing so and tapping institutional investors, life science companies have “a large mountain to climb.”Email to: bjohnson@njbiz.comOn Twitter: @ReporterBrett

Never enough resources

If New Jersey didn’t have enough going on for early-stage life sciences companies already — between 22 co-working facilities, 11 incubators and six accelerators, that would scarcely be said — there’s now another resource.

The New Jersey Economic Development Authority recently announced that the organization was launching the NJ CoVest Fund, a $3 million fund that will provide seed funding to local tech startups. Companies will be eligible for up to $250,000 through the program, but only if the funding is matched — double the amount requested — by outside investors.

The organization’s leaders hope the program will fill a market need for New Jersey companies looking for capital at a crucial stage of business development, where a funding gap currently exists.

CytoSorbents ended up raising capital on three occasions in relation to taking the company public, giving it the resources to continue down the path of bringing its product to local markets.

Bloch, who was named NJBIZ’s CFO of the Year in 2016, stood in at a recent event held by the EDA as a case study in what taking a biotech company public can look like.

But there’s no pinning down exactly what the experience of a company will end up being, as Kathleen Coviello, director of the Technology & Life Sciences Division of the EDA, reiterated.

“The takeaway from (that panel discussion) was that there’s no set road map for any one biotech company — each financing vehicle has pros and cons,” she said. “But, in any case, there’s a lot involved in taking a company public, between the roadshow, garnering support and the transparency involved.

“It’s not for the light of heart.”

There’s also no telling where it can lead a company, as former Celator Pharmaceuticals CEO Scott Jackson can attest to.

It was back in 2012 that Jackson’s company was privately held, but had completed a pair of phase two clinical trials on a candidate for blood cancer treatment that it wanted to have the resources enough to proceed to another phase with.

“The best bet for us was to take the company public,” he said. “We decided to not go the traditional IPO route, and instead become a public reporting company and do private placement financing in addition to that.”

When the New Jersey company’s leaders were confident enough in addressing Nasdaq reporting requirements, it also uplifted to become a public company.

While it did attract institutional investors, the visibility also brought a proposal for an acquisition from Jazz Pharmaceuticals. The company, which in 10 weeks had grown its stock from around $1 per share to $30 per share, ended up being acquired by Jazz for about $1.5 billion.

“Everyone always looks at how quickly that seemed to have happened and says, ‘Wow, how fantastic’ — and it was — but they don’t realize that there were 16 years that came before that at the company,” Jackson said.

Jackson said years went into thinking about the right course of action for getting to the point the company was at right before its valuation skyrocketed and it was acquired.

“Every company has to decide what the best course is to go public for them,” he said, adding that, without doing so and tapping institutional investors, life science companies have “a large mountain to climb.”

Device issue

The state’s biotech sector — even if its wish list isn’t as long as some industries — could name a few must-haves for the new president, Donald Trump.

Kathy Bloch, the CFO of CytoSorbents, has one.

“The new administration has indicated that they would want to be less restrictive, especially with regards to medical devices,” Bloch said. “We’re hoping that could help us get approval in the United States more quickly.”

CytoSorbents is producing a device that’s intended to remove toxins and purify blood in order to prevent organ failure from overactive immune systems. The device, CytoSorb, has completed preliminary trials — and is already approved and distributed in the European Union — but it has not yet completed a process that would potentially lead to it getting FDA approval, which would allow it to be commercialized in this country.

“Getting FDA approval is going to be huge for us because it allows us to enter the largest medical device market in the world — the U.S.,” she said. “We also (want it) because it also gives us the endorsement of a product accepted worldwide, as FDA approval is.”

Bloch, joining others, argues that medical devices with diminished potential to harm patients should have a different set of standards for this green light. Whether the new administration will see that — and act on it — is anyone’s guess.

“So far, it’s too early to see if what we’ve heard will translate to meaningful changes,” Bloch said.

More From This Industry

Brett Johnson

Brett Johnson

Brett Johnson covers a wide array of sectors as a general assignment reporter. Before joining NJBIZ in 2014, he lived on the West Coast and wrote for a newspaper in Davis, Calif. You can contact him at brettj@njbiz.com or @ReporterBrett on Twitter.

Leave a Comment

test

Please note: All comments will be reviewed and may take up to 24 hours to appear on the site.

Post Comment
View Comment Policy

Comments

close