Ironwood Pharmaceuticals finally made its long-awaited leap into the public market, but ended up falling far short of its very ambitious goal. The developer ended up selling 16.7 million shares at $11.25 each, well below its $14 to $16 target. That amounted to the biggest price cut for an IPO this year, but Ironwood nevertheless raised $188 million through an offering that valued the company at $1.1 billion.
Ironwood, which is well into its late-stage program to validate linaclotide, raised questions early on when it unveiled plans to push for a 31 percent premium over the company's fair market valuation. Investors were willing to buy, but they were quick to tame any starry-eyed projections about the company's upside.
"Buyers are going to be a little bit more in control in pricing, and Ironwood is a classic example," Fifth Third Asset Management's Scott Billeadeau told Bloomberg. "The market's going to be very choosy and try to put a valuation on companies that they're comfortable with."
A host of biotech companies have been kicking around long-delayed plans for an IPO. And they were waiting anxiously to see how well Ironwood, a developer with no real revenue, would do. Many of these companies may well go ahead with an offering, but they're likely getting advice this morning to keep it real.
"The deals are going to go through valuation haircuts as they come into the marketplace until we get some stabilization in the broad markets," David Menlow, president of Millburn, New Jersey-based IPOfinancial.com, told Bloomberg TV.
Over at Xconomy, meanwhile, Doug Fambrough, a general partner at Oxford Bioscience Partners, takes the view that the glass is nevertheless very much half full. "For the first half of the story, it's gone pretty well for the [life sciences] industry," Fambrough said. "The second half of the story is how well Ironwood's stock trades over the next two weeks."
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