Biotech Ruthigen seeks IPO boost for preclinical hope

With the IPO market increasingly appetizing to all manner of biotech companies, the little-known outfit Ruthigen has filed paperwork to raise up to $26.7 million in a public debut. The Santa Rosa, CA-based biotech group has based its IPO pitch on the promise of a preclinical drug candidate for treating infections in surgical patients.

Ruthigen, which is a wholly owned subsidiary of Oculus Innovative Sciences ($OCLS), plans to file an IND later this year to begin human studies of its lead candidate RUT58-60. The company wants to develop the hypochlorous acid-based compound for thwarting infections in patients after abdominal surgeries because of the large market and unmet need, according to an S-1 filing on Thursday. It aims to be listed on the Nasdaq under the symbol "RTGN."

About 30 biotech companies have gone public amid an IPO frenzy in 2013, raising more than $2 billion in the deals and enticing plenty of startups to follow them onto the public markets. In the aftermath of the 2008 financial meltdown, Ruthigen would likely have been laughed off Wall Street with an IPO plan based largely on the prospects of a preclinical anti-infective therapy. It's too early to say how public investors will receive the company's S-1, yet the startup wouldn't be the first biotech outfit to pull off an IPO this year before entering clinical trials.

Investors might look closely at the details of Ruthigen. Company CEO Hoji Alimi formed the company in January as a wholly owned subsidiary of the device and pharma group Oculus, where he had been chief executive and remains chairman of the board. The plan all along has been for Ruthigen to go public in order to raise funds for clinical development of its lead candidate.

Yet it's worth noting that Oculus, which owns Ruthigen, has a market value of $13.9 million. Ruthigen wants to raise almost twice that amount in its IPO. It's hard to see how this math works without granting RUT58-60 a major step up in value under the ownership of a newly public Ruthigen.

- here's the S-1

Special Report: Is the biotech IPO frenzy headed for a crack-up?

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