BG Medicine Chief Speaks on Rough IPO Climate, (Finally) Going Public

4/21/11

BG Medicine (NASDAQ:BGMD) took the long road to becoming a public company, scrapping its first attempt in 2008 and then spending just more than a year to wrap up its second IPO campaign this past February.

In a recent interview, Pieter Muntendam, the CEO of the Waltham, MA-based medical diagnostic company, told me how BG Medicine weathered the rough IPO climate and shared the company’s outlook for its main product: a test that assesses the prognosis of heart failure patients.

The public markets seem loath to buy into a life sciences company IPO. The select few firms that have actually completed an IPO have typically had to drop the asking price for their shares before buyers would commit. BG Medicine was no exception. The firm settled for $7 per share in its public debut in February, roughly half of what the company had previously sought for its stock, according to regulatory filings.

There was also some confusion about BG Medicine’s IPO plans in December when the company failed to price its shares on schedule. That sparked at least one media report that BG Medicine had again withdrawn its IPO.

In fact, the company never withdrew its IPO. Muntendam explained that the company decided not to price its IPO in December because of timing, with many people closing their books toward the end of the year.

“The biggest surprise for us was when we paused at the end of the year because we just couldn’t get it [the IPO] done before the end of the year, the media actually started this whole discussion about what had happened,” Muntendam says.

(Still, December 2010 appeared to be a good time for the China-based IT services firm iSoftStone Holdings (NYSE:ISS), whose shares went public at the high end of the expected price range for its maiden offering that month.)

BG Medicine ultimately raised $40.3 million from its IPO, which, like most such deals, was a financing event for the company and not a big payday for its investors like Flagship Ventures. The company now has enough cash to get through 2012.

Indeed, 2012 could be a key year for BG Medicine’s blood-based test for heart failure patients. Over the past two years, the company has won European and American regulatory approval for a manual version of the diagnostic, which tests for galectin-3 proteins that have been linked to progressive forms of heart disease.

Heart failure, which affects about 5.7 million people in the U.S., kills about 277,000 Americans a year. And one in five people with the disease are dead within a year, according to the company. Galectin-3 is a protein linked to progressive fibrosis or stiffening of the heart muscle, which makes it difficult for the heart to easily pump blood. The protein shows up in some 30 percent of heart failure patients, and its test could help guide doctors on how best to treat such patients.

BG Medicine expects demand for its test will grow when automated diagnostic machines, which could reduce the time of doing the galectin-3 test from three hours to 15 minutes, become available next year. In the first half of 2012, according to BG Medicine, the galectin-3 test could become available on one or more of these automated machines. The company partners with developers of the automated instruments—including Abbott Laboratories (NYSE:ABT), Alere (NYSE:ALR), and Siemens (NYSE:SI)—to provide content for the machines, just as software companies provide content that runs on computers, Muntendam says.

Also, BG Medicine is marketing its galectin-3 test, which Lab Corp. of America (NYSE:LH) began offering to doctors in January. The company is also using Facebook and Twitter to get the word out about the test. Muntendam says BG Medicine will focus on educating doctors about its technology. The company’s test has not yet been included in medical association guidelines or gained insurance reimbursements.

BG Medicine has spread its bets a bit, with a pipeline of tests at various stages of development. The company is working on a blood-based diagnostic that uses biomarkers to determine a patient’s risk of a heart attack or stroke within two to four years. The firm is also collaborating with Merck & Co. (NYSE:MRK) on a protein test for managing lipid disorders such as high cholesterol. BG Medicine hopes to commercialize both products next year. The company is also developing a way to monitor the disease activity of patients’ multiple sclerosis and a diagnostic to predict patient responses to a class of drugs for rheumatoid arthritis and other autoimmune diseases, called TNF alpha blockers.

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