biocentury: Infinity skips the IPO haggle
By Steve Edelson
Senior Writer
4/17/06
Since its inception in 2001, Infinity Pharmaceuticals Inc. has
raised money from VCs and pharma partners at valuations high
enough to raise questions about how it might go public in today’s
IPO environment. The small molecule cancer company provided
the answer last week when it said it would
merge with publicly held Discovery Partners
International Inc.
The deal also provides plenty of cash,
as DPII should have $70-$75 million in the
bank when the deal closes in the third
quarter.
Infinity (Cambridge, Mass.) will own
more than two-thirds of the newco, and its management team will
run the show. The company does not expect to retain any of
DPII’s operations, which are focused on chemistry services, and
hopes the service units will be acquired by other companies or
in management buyouts.
It’s not a merger of operations, only an infusion of Discovery
Partners’ cash into Infinity’s pipeline of cancer compounds, said
Adelene Perkins, EVP and CBO at Infinity. “To us, that smells like
a financing,” she said.
Infinity’s lead compound, IPI-504, is a small molecule inhibitor
of heat shock protein 90 (Hsp90) in Phase I trials for relapsed,
refractory multiple myeloma (MM) and relapsed, refractory gastrointestinal
stromal tumors (GIST). The compound is slated to
enter Phase II at year end. Also late this year, Infinity plans to file
an IND for IPI-609, a hedgehog pathway inhibitor, for pancreatic
cancer, small cell lung cancer and metastatic prostate cancer.
DPII’s money will buy a 31% stake in the newco. Infinity
figures that if 31% equals $72.5 million (the midpoint of the $70-
$75 million range), the entire company would be worth $233.9
Ebb & Flow Focusmillion, putting Infinity’s early clinical stage valuation at about
$161.4 million.
“This year, we’ve met with mezzanine finance players and
crossover funds for a private round, and with bankers, analysts
and buysiders to talk about a plain vanilla IPO,” said Infinity
Chairman and CEO Steven Holtzman. “Then this opportunity
came up. In terms of the price we’d get, all
three options were pretty much the same.
But this deal is a more time- and costeffective
way to access the public markets.”
“Our last venture round put us at
$150 million in the halo of the genomics
bubble,” Holtzman noted.
Infinity, which is not disclosing its cash, raised a total of $82.2
million in two rounds from venture investors, including a $70
million series B round in 2002. Since then, the company has
raised money at premiums to that valuation via equity investments
from corporate partners. Those investments put the
valuation of then preclinical-stage Infinity at $225-$250 million (see BioCentury, Jan. 10, 2005).
DPII (San Diego, Calif.) had been seeking alternatives for
about a year. The company was dealt a blow last November,
when Pfizer Inc. (PFE, New York, N.Y.) terminated discussions
for a deal to replace their four-year library deal, which subsequently
expired. DPII’s share price dropped 11% to $2.38 on the
news, and the stock had been hovering at that level ever since.
The company lost $14.2 million on $34.8 million in revenue
in 2005, compared to net income of $3.9 million on $44.3 million
in revenues in 2004.
DPII was unchanged last week at $2.46, which means it is
trading below its cash value. With some 26.1 million shares
outstanding, the company’s market cap is $64.2 million. |
