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12:00 AM
 | 
May 28, 2007
 |  BioCentury  |  Finance

Adding up Addex

Buysiders were clearly split on the pricing of the Addex IPO on the SWX Swiss Exchange last week. Despite being more than four times over-subscribed, the stock - which priced last Monday at CHF73 a share - went as low as CHF62.20 last Friday before recovering a tad to close the week at CHF65.

ADXN raised CHF137 million ($111.6 million) through the sale of 1.9 million shares for a post-money valuation of CHF428 million ($348.8 million).

About 45% of the IPO was bought by Swiss investors, with about one-fifth from those in the U.K. German investors accounted for 12%, the U.S. represented 8% and 6% came from Benelux. Lehman Brothers was the global coordinator and bookrunner, with Piper Jaffray; Bank Vontobel; and Bank am Bellevue as co-lead managers.

There were murmurs at last week's BioEquity Europe meeting in Glasgow that the bankers perhaps should have left more money on the table rather than pricing the offering at the higher end of the CHF58-CHF75 range. But they may have been blindsided by generalist institutions - which some specialists said had signaled to the bankers that they would be long-term holders - but instead exited the stock.

In any case, a number of buysiders told Ebb & Flow that they didn't participate in the IPO because they thought the price was too high.

"You cannot run a sensible DCF for a company with IIa data, so we calculated a fair value based on historical comparisons and this was below the price range. With a lot of goodwill I came up with CHF65," said one European buysider who did not want to be identified. "Since the IPO seemed to fly anyway, we saw no chance to renegotiate the price and so let it go."

ADXN's lead compound is ADX10059, a negative allosteric modulator of metabotropic glutamate receptor subtype 5 (mGluR5). It has completed Phase IIa testing to treat gastroesophageal reflux disease (GERD) and migraine. The compound is expected to complete Phase IIa trials to treat acute anxiety next half.

Other buysiders complained they were not given enough time to look at the neurology and gastrointestinal company's offering. "We had basically only 24 hours to do a little due diligence," noted one.

Comparators

But for other buysiders, ADNX's offering was a no-brainer, even if it might have come off in the aftermarket. One fund manager who got in at the IPO used neurological and gastrointestinal company XenoPort (XNPT) as a comparator.

"After two years it is a billion-dollar company. So if everything goes right for Addex, we could possibly get that level of return over the next two years or so," said the buysider, who also wanted to be anonymous.

At its IPO in June 2005, XNPT was valued at $201.9 million. Its lead compound, XP13512, a transported prodrug of gabapentin, was then in Phase IIb testing to treat restless legs syndrome (RLS) and in Phase II testing for post-herpetic neuralgia. Neurontin gabapentin is marketed by Pfizer(PFE) as adjunctive therapy for partial seizures and to manage post-herpetic neuralgia.

The company, which now has Phase III data in RLS and is aiming to submit an NDA in 2008, was valued at $1 billion as of Friday.

Another buysider had hoped to hold the stock for just a few weeks before flipping it, but nevertheless was not too concerned by the soft aftermarket. "Basilea did something similar when it first went public and it took about three to four months before the share price settled. Since then, on the back of positive newsflow, the trajectory has been impressive," the buysider noted.

Basilea (SWX:BSLN) listed on SWX at CHF98 in March 2005 and drifted down to CHF62 by the end of August 2005. The infectious disease play closed last week at CHF277.50.

IPO at Phase I

Early-stage metabolic play Sirtris (SIRT) cashed in on investor enthusiasm for obesity and diabetes companies with a bumped up IPO on NASDAQ. SIRT priced in the middle of its range at $10 and increased the number of shares sold to 6 million from 5 million, then traded up $2.59 (26%) to close the week at $12.59.

The company also is capitalizing on interest in sirtuins, a class of enzymes that are triggered by calorie restriction. It is in the middle of two Phase Ib trials in Type II diabetes for lead candidate SRT501, a formulation of the...

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