BG Medicine Taking Second Shot at Public Market, Proposes $86.3M IPO

1/29/10

BG Medicine has matured since it pulled its previous plans for an initial public offering in January 2008. The Waltham, MA-based developer of molecular diagnostics revealed a new proposal this morning to raise $86.3 million in an initial public offering to bring its first test, for heart failure, to patients in the U.S. and Europe.

In October, the company garnered European clearance to sell its Galetin-3 diagnostic product, which identifies the galetin-3 protein in blood to predict whether a patient is at risk of heart failure. European sales have since begun. The next big hurdle will be whether the FDA, which denied the firm’s application to start selling the test last year, will look favorably on an application submitted to the agency in December, according to the firm. The company is hoping to get the green light to begin marketing the test in the U.S. by the second half of this year.

The IPO plan, which the company described in a new regulatory filing today, would provide BG Medicine with some much-needed cash. The company, which was founded in 2000, had racked up a deficit of $78.6 million as of December 31, 2009, according to the filing. The firm finished last year with $10.3 million in the bank, and its auditors have said that its available cash will support its operations through June 2010, or the second quarter of the fiscal year. (Of course, BG Medicine was able to reel in $40 million from its investors after it scrapped its initial plans for an $80 million IPO two years ago.)

Who stands to gain the most from a BG Medicine IPO? Cambridge, MA-based Flagship Ventures is the company’s largest stockholder with a 44.4 percent stake. Its other major shareholders include Gilde Europe Agribusiness Fund (14.1 percent), GE Pension Trust (7.4 percent), Legg Mason Capital (7.4 percent), and Small Cap World Fund (7.4 percent), according to the regulatory filing. CEO Pieter Muntendam has a 3.6 percent percent stake.

Heart failure affects about 5.8 million people in the U.S. and is one of the top causes of death in the country, according to American Heart Association figures cited in BG Medicine’s filing. In Europe, there are a similar number of patients affected by heart failure, a condition in which the heart fails to efficiently pump enough blood through the body to keep organs functioning, according to the company. The firm has an agreement with health products giant Abbott Laboratories (NYSE:ABT) to include its galetin-3 test one of Abbott’s diagnostic instruments. Yet while there’s a huge potential market for the company’s galetin-3 test, health insurers would have to agree to provide reimbursement for the test to make it a commercial success.

Luke provided a great overview of BG Medicine’s business in summer 2008, explaining how the company got its start by providing its molecular tests for drug companies to find out which patients were good candidates for their clinical trials.

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