Beyond Borders: Global biotechnology report 2010

The final 2009 IPO to close in the US was
Omeros, which raised US$68 million in
another early-October transaction. Unlike
the two transactions discussed above,
Seattle-based Omeros fits the mold of
most biotech IPOs. The company’s most
advanced product candidate, based on
its PharmacoSurgery platform, is in
Phase III trials.
While Talecris saw its stock price increase
A closer look
Anatomy of a private equity IPO
The largest IPO of 2009 was not a traditional transaction by
biotech standards — both because of the size of the company
and because of the size of the transaction. The IPO raised
US$1.1 billion, including US$550 million of new money for the
company, and provided a very healthy return for investors.
North Carolina-based Talecris Biotherapeutics, which was
carved out of Bayer in 2005, now has 5,000 employees and
posted 2009 revenues of US$1.5 billion and a net income
of US$154 million from the sale of plasma-derived protein
therapeutics. The company’s legacy extends back many
decades through several acquisitions, culminating with the
purchase from Bayer by private equity firms Cerberus Capital
Management and Ampersand Ventures for US$450 million — of
which the investors contributed US$125 million and the rest
was funded via Talecris debt and equity issuances. Ampersand
also contributed a plasma business it had previously purchased.
Following the carve-out, the company undertook a rapid vertical
integration of its blood plasma supply chain to solidify its
primary source of raw materials. At the end of December 2009,
this consisted of 69 blood plasma centers. In 2006 and 2007,
management and the board also focused on positioning the
company for new product introductions and global expansion
through investment in systems, R&D and the addition of a
substantial number of new employees.
from the date of the transaction through
year-end, both Cumberland and Omeros
demonstrated the risk that investors in
small-cap stocks take. The stocks lost 19%
and 30% of their IPO values by the end of
2009, respectively.
68 Beyond borders Global biotechnology report 2010
Venture capital
The trend of a small number of companies
comprising a significant portion of total
capital raised extended to venture-backed
companies. In 2009, only 45 companies
accounted for fully half of total venture
capital raised by US companies. This total
was led by the remarkable US$146 million
raised by Boulder, Colorado-based Clovis
Oncology. Clovis was founded by former
executives of Pharmion, which was sold
Michael Constantino
Ernst & Young LLP
On the financing side, in 2007, the firm’s PE backers executed a
recapitalization transaction whereby Talecris borrowed in excess
of US$1 billion and paid its investors a dividend of approximately
US$800 million — already a sizeable return on the initial
investment. In 2008, the company prepared for an IPO, but
instead accepted a US$3.1 billion takeover offer from CSL Ltd.,
itself a significant global player in blood fractionation derived
products. The acquisition was ultimately not culminated because
of anti-trust issues raised by the US Department of Justice.
As a result, in 2009, Talecris jumped back into the IPO fray,
debuting as a public company in an October 2009 transaction
in which the company and its investors sold an aggregate of 56
million shares at US$19 per share. Following the transaction,
the company’s market capitalization was US$2.3 billion; the
PE investors had received aggregate proceeds from dividends,
sales of stock and other fees in excess of US$1.3 billion; and the
investors still controlled approximately 50% of Talecris’ common
stock — an incredibly successful outcome both for the business
and its investors.