Anyone trying to understand what it takes to pull off a successful biotech IPO these days should check out a series of 13Ds Verastem's ($VSTM) insiders filed last month. In the days after Verastem went public the insiders noted that they had collectively acquired 43% of Verastem's stock. And Christoph Westphal's Longwood Fund captured the biggest share--taking home 13.63% of the offering.
Westphal founded Verastem, a preclinical drug developer focused on cancer stem cells, and then quickly went public at a stage when most such developers could only dream about an IPO. Westphal, though, has some of the best connections in the industry after selling Sirtris to GlaxoSmithKline ($GSK) for $720 million and going on to run GSK's venture arm briefly. He runs Longwood along with Rich Aldrich and Michelle Dipp. The other insiders, Bessemer, CHP and MPM each nabbed close to 10% of the IPO shares.
Over the past three years only a handful of biotechs have managed to pull off an IPO without taking a big haircut on the share price. And in most cases that required some big help from the companies' insiders. That's a point that has been openly acknowledged by Ironwood CEO Peter Hecht, who could count on some big insider help when he took the biotech public.
It's also no surprise to Bruce Booth, a partner at Atlas Venture who has been closely following the trend. In a tweet this morning Booth noted that while he hadn't personally run the numbers, 43% wouldn't be radically out of line with the numbers he's seen. That level of insider participation is only marginally higher than the 33% median on insider buying for big biotech IPOs, notes Booth.
- here's the 13D from the Longwood Fund
Correction: After we published today's report I had a chance to talk to Robert Forrester, the COO at Verastem and an experienced biotech exec in his own right. Forrester corrected the bottom line of the report, noting that company insiders had limited themselves to buying $14.8 million in IPO shares, which amounted to 23% insider participation of the $63.3 million raise. The 43% insider stock ownership is a combination of all the shares they own, from both pre- and post-IPO buys. "We had such a strong demand for the IPO that we asked the existing investors if they would scale back," says Forrester. "Most didn't want to, but a couple did." FierceBiotech regrets the mistake. -- John Carroll