Ironwood Climbs 3.6 Percent on IPO Debut Day, Shows Investor Interest—Albeit Tepid—in Biotech

2/3/10Follow @xconomy

Ironwood Pharmaceuticals showed today that an IPO market does exist for a serious biotech company without a moneymaking product on the market, but that investors’ appetite for the speculative business of drug development is modest.

The Cambridge, MA-based biotech company set its initial public offering price at $11.25—a far cry from its forecasted price range of $14 to $16. By the end of today’s trading, the initial investors had made a little money, as the stock (NASDAQ: IRWD) opened trading at $12.40 and finished the day up 3.6 percent to close at $11.65, after about 2.7 million shares changed hands. This action came on a ho-hum overall trading day, in which both the Nasdaq Composite and Nasdaq Biotechnology Indexes were basically flat.

Importantly for Ironwood, the IPO raised $188 million in new cash for operations, turned the company’s stock into a liquid asset for its employees and venture investors, and established an initial market valuation of $1.1 billion.

The Ironwood deal marks only the third time in two years that a biotech company in the product-development phase has been able to complete an IPO. Sunrise, FL-based Bioheart did it in February 2008, and flamed out soon after, while Seattle-based Omeros (NASDAQ: OMER) has lost almost 40 percent of its value since it went public in October. As I noted on Monday, Ironwood is clearly in a different category than most biotech IPO candidates, since it has a drug for a big market that has already passed two pivotal clinical trials. Still, plenty of biotech investors were hoping Ironwood could crack open the IPO window, and re-ignite the interest of general public investors in other IPO aspirants.

I have a few calls out to ask for commentary about what ripple effect the Ironwood deal may have on the rest of the biotech sector, and I may update this space later if I hear anything noteworthy.

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  • http://www.xconomy.com/author/ltimmerman/ Luke Timmerman

    I just spoke to Richard Pops, the CEO of Waltham, MA-based Alkermes. Here’s what he said about the Ironwood IPO:

    “It’s terrific that it got done. It traded a bit up today. It may be that we’re slowly getting closer to business as usual.”

    He added that we’ll better understand the full impact in another 12 months, if other companies are able to go public.

  • http://www.xconomy.com/author/ltimmerman/ Luke Timmerman

    Bob Nelsen, the managing director of Arch Venture Partners in Seattle, just sent this note about the Ironwood IPO.

    “Ironwood shows that the window is open for quality companies and that the bar will remain high, but quality will get solid valuations. Let’s not forget the valuation Ironwood achieved is higher than almost any pre-revenue biotech company in history at IPO. The reason typical biotech IPO investors are taking potshots at the deal is because very large funds were willing to pay a premium for a premium company, and the normal biotech IPO investors are used to having complete price control. They got shut out completely.”