Westphal pulls off a rare stunt with $55M Verastem IPO
Christoph Westphal's Verastem, a preclinical-stage biotech focused on cancer stem cell research, seemingly defied gravity with an announcement late last night that its IPO raised $55 million from the sale of 5.5 million shares at $10 apiece. The price fell precisely in the middle of its range, qualifying it as a unicorn among the rare breed of companies that play in this field. And Verastem actually upped the offering by a million shares over what had originally been planned.
What the company's release fails to note is how much Westphal, a venture capitalist himself with a broad range of connections in the investment world, put up along with the biotech's other backers. In an earlier SEC document, Verastem noted that investors had agreed to buy up to $16.3 million of the offering, a common ploy among the developers which have pulled off the occasional successful IPO over the past three years. With more than 19 million common shares outstanding, the offering values Verastem at $192 million.
Even so, analysts in the IPO field had a hard time understanding the logic behind a preclinical biotech IPO at a time late-stage companies are often given short shrift. This month has seen few initial offerings of any kind, noted Dow Jones as it reviewed one skeptically. "Verastem's is even less attractive," wrote Lynn Cowan, "with neither revenue nor profits, and a potential product pipeline that hasn't yet begun full clinical trials."
The company starts trading today under the $VSTM symbol, joining a small group of biotechs going public. As we noted in a recent special report, only 10 biotechs went public last year, down from a meager 13 in 2010.
This isn't the first time that Westphal has managed to pull off a financial coup for a high-risk company. He launched Sirtris and sold it to GlaxoSmithKline ($GSK) for a whopping $720 million, and GSK has stood by the company as researchers have raised serious questions over the science involved. Later he had a brief stint as the head of SR One, GSK's investment arm. And he founded Longwood Founders Fund, which has a 15.4 percent stake in Verastem. Other backers include CHP with 13.5 percent; MPM Bioventures with 13.1 percent; Bessemer Venture Partners with 12.9 percent; Eastern Capital Limited with 7.8 percent; and Advanced Technology Ventures with 5 percent, as Xconomy notes in its coverage of the event.
Special Report: The 10 biotech IPOs of 2011