Reproduction permitted for personal use only. For reprints and reprint permission, contact email@example.com.
Now that Thanksgiving is officially over, we are into the home stretch of the year with just December to go.
For those of you following the biotech IPO market, there are in reality about two weeks left in the year as everything really closes down in the public equities market (as far as IPOs go) by the middle of December. New activity won't be happening until the middle of January 2005.
What seemed like a promising and valiant biotech IPO market has fizzled out with not much action happening in November. Perhaps the trials and tribulations facing Merck after Vioxx have put a sever damper on the market.
A friend told me that the Vioxx effect in a few short days dropped the overall value of Big Pharma companies by $50 billion (more than half of which was Merck alone). Merck is hardly out of the woods, too, with potential patient liability lawsuits estimated at somewhere between $10 and $20 billion.
It didn't help matters much for the pharma industry that an FDA official went public last week with his perspective. He said there are at least four or more additional drugs that are sleepers in terms of potential major side effects that the FDA hasn't taken any action on but is aware of the potential effects.
All of this and more makes for a shaky IPO market! Let's take a look more specifically. William Blair and Co., which diligently tracks the biotech IPO market, shows the following in its Nov. 22 IPO update:
36 IPOs since last fall (2003).
No new IPOs took place in November. The last was in October.
There are 10 IPOs that have filed but are on hold with the last filing taking place in September. If priced at their proposed offering price, all 10 represent about $853 million in potential funding. Some of these have been filed since August 2003.
To date, the return of the 36 IPOs is about 10 percent and the average company market cap is about $372 million.
Some of the companies have done spectacularly. For example, there's Pharmion, which went public at $14 per share and is now trading at more than $50 per share, and Eyetech, which went public at $21 per share and is now trading at more than $44 per share. All in all, 20 of the 36 IPOs show positive stock price growth.
An analysis from Burrill & Company
shows some slightly different data:
There is an IPO backlog of 12 companies filed and still waiting to go.
An additional six companies pulled their IPO off the market.
Burrill's data also shows that about $2.1 billion has been raised in the IPOs to date. While we are still substantially lower than the 50 IPOs that Burrill predicted in this IPO window, maybe his time horizon has lengthened into 2005.
The bellwether industry financial meeting in early January (the former H&Q Conference), which has morphed into the JP Morgan Chase meeting, will reveal the industry crystal ball for 2005.The Globalization of a Midwest Life Science Company
Though most of my readers know me as their weekly biotech columnist and some may know me as a biotech executive, another hat I wear on a weekly basis is as an instructor of an M.B.A. class on international management at the Lake Forest Graduate School of Management.
As a typical class includes budding executives from Abbott, Baxter, Hospira, Medline and Fujisawa, class topics invariably focus on pharmaceutical and biotech activities around the world. Though I am supposed to be the one imparting knowledge of setting up operations around the world and the globalization of a business, I actually learn something from my students.
In my last class, some of my students first made me aware of a Midwest-based pharmaceutical company called the Perrigo Company
, which is located in Allegan, Mich. Surprisingly, this company had 2004 sales of about $900 million with net income of about $80 million. Perrigo currently sports a market cap of about $1.3 billion.
As I dug into Perrigo a bit more, I saw that its claim to fame is the nation's largest manufacturer of store brand over-the-counter (OTC) pharmaceutical and nutritional products sold by supermarket, drug and mass-merchandise chains.
Perrigo actually has a long history and was started in 1887 by Luther Perrigo, who had the idea to package and distribute patented medicines. It was in the 1920s (with 50 sales representatives combing the Midwest) that the company switched gears to go into the private-label pharmaceutical business for key customers.
Key customers and business partners include: Wal-Mart CVS Pharmacy Walgreens Target Publix Kroger Safeway RiteAid
Today, Perrigo manufactures more than 30 billion OTC and nutritional tablets per year and is the nation's: largest producer of liquid antacid, second-largest purchaser of acetaminophen (the main ingredient in Tylenol), second-largest purchaser of ibuprofen (the main ingredient in Motrin, Nuprin and Aleve), and the second-largest purchaser of psyllium (the main ingredient in Metamucil).
In 2003, Perrigo acquired Peter Black Pharmaceuticals in the U.K. Together with its 2001 acquisition of Wrafton Laboratories in the U.K., Perrigo became the U.K.'s largest manufacturer of OTC pharmaceutical and nutritional products for the store brand market.
Perrigo had already established a presence outside the U.S. in Mexico called Perrigo de Mexico, which is one of the largest of the Latin American markets. Perrigo also maintains ties with China and India for sourcing of pharmaceutical raw materials and has opened up offices in both countries.
The news about Perrigo that originally got me interested and initiated my search for further information was a Nov. 15 press release (which was identified by my students) about Perrigo's acquisition of Agis Industries in Israel for $818 million. Agis is the second-largest pharmaceutical company in Israel. Teva Pharmaceuticals is the largest.
The combined company will have revenues of $1.3 billion and about 6,000 employees.
Perrigo's niche in the very large pharmaceutical market is the generic supply of OTC drugs to large chains to allow them to market house (or private label brands) to compete with the branded OTC products based on price. As such, Perrigo is a generic pharmaceutical company, and with the acquisition of Agis, it will now become a larger generic manufacturer with operations in key parts of the world.
The worldwide market for OTC pharmaceuticals is $107.5 billion, according to the November 2004 edition of Med Ad News. This is very attractive and is expected to increase 45 percent by 2007. The global generics market is also substantial and was worth about $35.4 billion in 2003. It is expected to reach $71.9 billion by 2007, according to Med Ad News.
Perrigo is positioning itself to play in both of these marketplaces in the U.S. and in other international markets. With these two international acquisitions in the last two years, the company has broadened its horizons outside the U.S. market. See you next week!
Michael S. Rosen is president and CEO of Barbeau Pharma and a founder and board member of the Illinois Biotechnology Industry Organization (IBIO). He can be reached at firstname.lastname@example.org. This article has been syndicated on the Wisconsin Technology Network courtesy of ePrairie, a user-driven business and technology news community distributed via the Web, the wireless Web and free daily e-mail newsletters. They can be found at www.eprairie.com.
The opinions expressed herein or statements made in the above column are solely those of the author, & do not necessarily reflect the views of The Wisconsin Technology Network, LLC. (WTN). WTN, LLC accepts no legal liability or responsibility for any claims made or opinions expressed herein.