Quark Pharmaceuticals Inc. has withdrawn its IPO on Nasdaq. The company had hoped to raise $60-70 million at a company value of $219-256 million.
Quark refused to reduce the price offering in the IPO. The company has no plans to make another attempt in the foreseeable future, but will probably wait for a climate change in the capital market or for major progress in its activity.
Quark’s IPO failed even though the company has a drug undergoing clinical trials, the backing of Oracle founder and CEO Larry Ellison, a contract with Pfizer Inc. (NYSE:PFE; LSE:PFZ), which is already generating revenue, and the fact that the company’s business of developing drugs based on Silent RNA (SiRNA) is currently popular on Wall Street. It is possible that investors were influenced by the failure of Phase III clinical trial for a drug being developed by Coley Pharmaceutical Group (Nasdaq:COLY), which also has a contract with Pfizer. This failure reminded investors that Quark will only earn hundreds of millions of dollars from its contract with Pfizer if the company’s experimental drug passes US Food and Drug Administration (FDA) mandated clinical trials and succeeds in the market.
Quark did not ask for an excessive price in its IPO, but Wall Street has become less friendly towards experimental biotechnology companies lately, especially early-stage companies. Investors are pricing these companies at a major discount compared with the prices that large pharmaceuticals companies are acquiring their competitors.
Quark’s failure of the IPO will unquestionably take the wind out of the sails of other Israeli (and other) drug development start-ups who are considering IPOs and steer them towards planning to be acquired.
Despite the failure of the IPO, Quark’s future is not at risk for now. The company has plenty of cash and even posted a small profit for the first quarter thanks to milestone payments from Pfizer.
Published by Globes [online], Israel business news - www.globes.co.il - on July 1, 2007
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