ZS Pharma Ends Texas Biotech IPO Dry Spell With $86M Pitch

5/20/14Follow @angelashah

Biotechs all over the country have been rushing into the IPO queue over the last year—just, as it turns out, not in Texas. That changed this past week, when ZS Pharma, a suburban Fort Worth, TX, biotech, revealed plans to go public and raise as much as $86 million from investors.

ZS Pharma is developing a drug called ZS-9 to treat chronic kidney disease, and is looking to Wall Street for the cash to help get it through late-stage clinical trials and on to the market. Should it go public, ZS Pharma would use the ticker “ZSPH” and list on the Nasdaq.

ZS Pharma’s filing got me looking for the last Texas life sciences firm to hit the public markets. Until the recent slowdown, the biotech IPO pipeline had been rather robust in other parts of the country. Our former national biotech writer Luke Timmerman reported that as of last August, 30 life sciences had gone public, more than double the annual rate of biotech IPOs since 2008.

As it turns out, finding the most recent Texas biotech IPOs wasn’t an easy task. I pinged our friends at BioHouston, which works to boost the life sciences ecosystem not only in the Bayou City, but throughout the state, and they pointed to research at the Trout Group, which shows a string of five Texas biotech IPOs—each of which took place 14 years ago.

Between March and October 2000, Luminex (NASDAQ: LMNX), Tanox (NASDAQ: TNOX), Lexicon Pharmaceuticals (NASDAQ: LXRX), Pain Therapeutics (NASDAQ: PTIE), and Introgen Therapeutics went public in deals that ranged from $36.8 million (Introgen) to $244 million (Tanox.)

There is one caveat that we could find. Pernix (NASDAQ: PNX), a maker of children’s medication based in The Woodlands, TX, went public in 2010—but BioHouston’s CEO Jacqueline Northcut points out that that, technically, the transaction was a reverse merger, a less traditional approach to going public.

Some of these companies are still afloat. Luminex, based in Austin, TX, expanded its disease-screening technology by buying biotechs in Toronto and Wisconsin earlier this year. Its Austin counterpart, Pain Therapeutics, has seen its share of ups and downs over the years—the FDA has twice rejected its lead drug, an extended-release oxycodone (Remoxy) the company co-developed with Pfizer, since 2008. And Lexicon, based in suburban Houston, slashed half of its workforce in January to conserve cash to take a diabetes drug prospect into Phase 3 trials.

The remaining two have dropped off of the Texas biotech landscape. Tanox was acquired by Genentech in 2006 in a transaction worth about $919 million.  Introgen, which was also based in Austin, had been developing a gene-based drug called Advexin to treat head and neck cancers. But when the FDA rejected the drug in 2008, the stock price slid and Introgen filed for bankruptcy. It’s since been liquidated.

Xconomy readers, are we missing any Texas biotech IPOs? Let me know.

In the meantime, ZS Pharma, which was founded in 2008, is developing ZS-9, which is designed to reduce excess amounts of potassium in the blood of patients with hyperkalemia. In March, the company raised $55 million in a private round to help finance late-stage studies for ZS-9 and prep to file new drug applications with the FDA and the European Medicines Agency by early 2015. The IPO cash would help with the effort.

Due to the quiet period imposed around the IPO filing, Robert Alexander, the company’s executive chairman, could not comment on the company’s progress. ZS Pharma initially filed with regulatory authorities last month, reporting that JP Morgan and Credit Suisse will lead the deal jointly.

Does ZS Pharma’s filing signal that Texas’ biotech drought is soon over? Maybe, says Imran Alibhai, vice president at Texas BioAlliance in Houston. How quickly biotech companies actually hit the market after filing their IPO papers depends primarily on ever-changing investor sentiment, along with which life sciences therapeutics are currently en vogue, the syndicate backing the company, and a host of other factors. “Some go out amazingly fast,” he says. “And others lag.”

Angela Shah is the editor of Xconomy Texas. She can be reached at ashah@xconomy.com or (214) 793-5763. Follow @angelashah

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