News Article

FibroGen's $146M IPO haul vaults to top of Bay Area biotech offerings
Date: Nov 14, 2014
Author: Ron Leuty
Source: bizjournals ( click here to go to the source)

Featured firm in this article: Fibrogen Inc of San Francisco, CA

In the biggest Bay Area biotech IPO this year, FibroGen Inc. raised $146 million, selling 8.1 million shares at $18 each.

The initial public offering is a coming out party of sorts for San Francisco's FibroGen (NASDAQ: FGEN), which has mostly stayed quiet while building a hefty portfolio of experimental drugs and two big partnerships while becoming the largest biotech employer in Mission Bay.
But the offering is another indicator that high-end IPO investors will pay up for IPOs in the high-risk biotech space when those companies have substantive drugs in the works.

In all, 18 Bay Area life sciences have gone public this year, raising more than $1.4 billion. Before FibroGen, the largest of those local offerings was $126 million by growth hormone developer Versartis Inc. (NASDAQ: VSAR) and earlier this month by Nevro Inc., the maker of a medical device to alleviate pain (NASDAQ: NVRO).

FibroGen's $18 IPO price was near the top of the $16 to $19 range that the San Francisco developer of drugs for anemia and fibrosis (NASDAQ: FGEN) expected in filings with the Securities and Exchange Commission.

Goldman Sachs, Citi and Leerink Partners are lead managers.

FibroGen, led by Chairman and CEO Thomas Neff, is targeting a number of hard-to-treat diseases, including pancreatic cancer, the lung-scarring disease known as idiopathic pulmonary fibrosis, Duchenne muscular dystrophy and anemia in chronic kidney disease patients.

What's more, FibroGen is targeting China with at least two drugs. It is expected to begin a late-stage clinical trial there in the first half of 2015 with its lead drug, called roxadustat, for anemia, and its drug FG-5200 is aimed at blindness.

Roxadustat, which is in late-stage clinical trials, is part of an emerging class of drugs aimed at inhibiting what's called hypoxia-inducible factor, a protein that plays a role in producing red blood cells. The oral drug could allow the sickest of kidney disease patients avoid intravenous iron supplements.

FibroGen also has inked major deals with Astellas Pharma Inc. and AstraZeneca around roxadustat. Licensing and milestone revenue pushed the company into the black — rare among clinical-stage biotechs — in the first half of this year.

Astellas and CEO Neff are the company's largest shareholders.

That all said, FibroGen offers one reason investors generally are wary of biotech companies — the company was founded in 1993 and still doesn't have a drug that is approved and being sold. That is a common story in biotech. However, for investors looking for quick returns, biotech stocks can be a throw of the dice because of scientific risks, questions about Food and Drug Administration approval of drugs and, finally, whether doctors will prescribe and insurers will pay for the drugs.

The biotech sector was hit hard by the Great Recession, when Wall Street and venture capitalists exited the space for social media, tech and other industries that could offer quicker returns. Only over the past two-plus years has the life sciences industry bounced back. And even then, the IPO window has opened and faded based on a number of factors, including concerns over Congressional meddling in pricing.