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Trailblazers Test Public Markets

By Kevin Davies

May 12, 2006 | Three trailblazing companies in postgenomic fields ranging from chemical genomics to whole-genome association mapping to in silico biology are going public. Infinity Pharmaceuticals, Perlegen Sciences, and Entelos announced they would be entering the public markets by means of merger, IPO, and institutional offering. Of the 10 IPOs in the first quarter of 2006, eight were venture-backed life science firms. “These are funding events, not liquidity events,” says IDG Ventures’ Michael Greeley. “There’s not a lot of alternatives out there.”

Last month, Infinity Pharmaceuticals, a pioneer in the field of chemical genomics small-molecule drug discovery for cancer (see Conquering Infinity with Chemical Genetics, Feb. 2003 Bio-IT World), is to merge with publicly traded Discovery Partners International (DPI), based in San Diego. The new company, which will focus on cancer drug discovery and development, will trade on Nasdaq under the symbol “INFI.”

Steven Holtzman, chairman and CEO of Infinity, says the deal made “enormous sense... The merger is a creative, time-efficient, and cost-effective means for Infinity to accelerate the discovery, development, and delivery to patients of important new medicines” (see May 2004 Bio-IT World, p. 10). Infinity has a lead drug candidate in Phase I clinical trials (IPI-504), a second candidate (IPI-609) poised to enter the clinic, and pipeline partnerships with Novartis, Johnson & Johnson, and Amgen. Infinity aims to have at least one new drug enter clinical trials each year over the next several years.

Michael Venuti, acting CEO of DPI, says the decision to merge with Infinity arose from economic necessity. Following the expiration of its library deal with Pfizer, DPI faced two choices: either identify new sources of contract revenue or leverage existing technology platforms.

Venuti says falling library prices had become a “negative margin proposition that cut us out of our most profitable business.” Other parts of DPI still earn respectable revenues, Venuti says, “just not enough to sustain a public company.”

The merger agreement must be approved by both companies’ stockholders. Once complete, Infinity stockholders will own approximately 69 percent of the new company. Infinity, based in Cambridge, Mass., employs about 100 staff, or “citizen owners” as Holtzman calls them.

As part of the NIH Chemo-Genomic Roadmap initiative, DPI provides small molecules under contract to the NIH. This operation will continue in San Francisco, even as DPI seeks to transfer ownership of its services units in San Diego, Basel, and Heidelberg to other organizations.

Perlegen IPO
Also last month, Perlegen Sciences filed papers with the U.S. Securities and Exchange Commission for a proposed IPO. The company, which was spun out of DNA microarray giant Affymetrix in 2001, conducts high-throughput SNP analysis for genetic mapping, drug response, and the development of late-stage genetically targeted medicines.

The major shareholders are Affymetrix (25.4 percent) and Pfizer (13.3 percent). Last year, Perlegen reported a loss of $21.9 million on revenue of $40.5 million. Perlegen’s proposed IPO is valued at $115 million, which would top the $105 million IPO by Altus Pharmaceuticals earlier this year.

Perlegen is best known for its contributions to the International HapMap Project, the first draft of which was published last year. The company has gone on to type a total of 3 million SNPs in dozens of individuals from different ethnic backgrounds, expediting the search for common disease genes. But Perlegen says it wants to test its own drug candidates for diseases such as type 2 diabetes. “Our objective is to find enough [susceptibility genes] so you can provide a ‘bar code’ that will predict how people will respond,” CEO Brad Margus says.

Meanwhile, biosimulation specialists Entelos conducted an institutional investor stock offering that raised $20 million. This brings Entelos’ market capitalization to approximately $78 million. The company debuted on the London Stock Exchange AIM index and saw the price of its shares jump more than 9 percent on the opening day of trading. IDG Ventures’ Greeley says Entelos’ strategy to list on a foreign exchange “merits a lot of attention.”

Founded in 1996, Entelos develops in silico models of “virtual patients,” allowing it to model the effects of various drugs and interventions on different disease states and pathways. Entelos will use the new funds to build additional PhysioLab platforms in new therapeutic areas and expand its existing models in asthma, obesity, diabetes, and rheumatoid arthritis.

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