Upstart Verastem challenges Wall Street with puzzling $50M IPO

Tools

Just a few months ago Christoph Westphal's new biotech, Verastem, raised a hefty $32 million Series B round based on the promise of the developer's cancer stem cell technology and a trio of noted scientific founders from MIT. Today, with its programs still at a preclinical stage and Wall Street turning a cold shoulder to almost every life sciences company without steady product revenue, Verastem filed to raise up to $50 million in an IPO.

In a move likely to prompt a considerable amount of head scratching among analysts, Verastem fielded its IPO team at a time many much more mature biotechs would be afraid to even mention the idea of going public. UBS Investment Bank and Leerink Swann are acting as joint book-running managers for the planned offering. Lazard Capital Markets, Oppenheimer & Co. and Rodman & Renshaw are serving as co-managers.

Westphal has attracted a considerable amount of attention for his upstart biotech. He scored a coup by selling Sirtris to GlaxoSmithKline for $720 million--after whipping up excitement for animal data on longevity that has grown increasingly controversial--then taking the helm at Glaxo's SR One venture group briefly. He now operates his own venture group, Longwood Founders Fund, and recruited ex-Genzyme CEO Henri Termeer for the Verastem board. That kind of rep has provided some clout on Wall Street, and he'll need every bit of it to pull off an IPO with nothing to show investors except preclinical data.

The risks are all clearly spelled out in the company's S1 statement. The science is unproven, their work isn't even in the clinic and the company hasn't even spent much money--only $8.5 million to date--with little actual operating experience.

MIT's Robert Weinberg told The Wall Street Journal last December that cancer stem cells often make up the hardy survivors of chemotherapy. He and MIT's Eric Lander and Piyush Gupta are advising Verastem as it prepares to enter the clinic next year. And they are far from finished. A number of researchers are still trying to determine exactly how cancer stem cells work--and how they can be extinguished.

Westphal is no stranger to controversy, either. Last year GSK execs were clearly disturbed to see reports that he and a close associate were selling a dietary supplement including resveratrol, a primary ingredient of Sirtris's therapeutic. And two scientific teams have now challenged the animal data that was used to launch Sirtris, saying the initial data could have been triggered by the animal models which were used in the study.

- here's the press release
- here's the S1 statement

Related Articles:
Westphal VC group backs a cancer stem cell startup
Verastem snags $32M for drugs against cancer stem cells
Westphal leaving SR One, concentrating on VC firm
GSK orders Sirtris execs to stop selling resveratrol