After a series of delays partly caused by Brexit-inspired stock market volatility, Northville, MI-based biotech startup Gemphire Therapeutics (NASDAQ: GEMP) has successfully completed its initial public offering. The good news is the IPO gave Gemphire, which ended the first quarter with just $1.6 million in cash, some needed financial breathing room. The bad news is Gemphire had to settle for far less cash to price the IPO and has since seen its shares slide further downward—a common occurrence amongst biotech offerings of late.
Gemphire priced three million shares of common stock at $10 per share on Thursday, raising approximately $30 million. That’s well short of Gemphire’s projections; the company initially aimed to raise $45 million by selling 3.75 million shares at $11 to $13 apiece.
Gemphire shares fell to $9.20 apiece in their debut, and have since fallen to about $8.95 as of midday Wednesday. It’s not alone in that regard. Though biotechs have still been able to go public in a volatile market, three of the last four to complete IPOs—Selecta Biosciences (NASDAQ: SELB), Kadmon Holdings (NASDAQ:KDMN), and Syros Pharmaceuticals (NASDAQ: SYRS)—currently trade below their offering price. Shares of the other, Audentes Therapeutics (NASDAQ: BOLD), have hovered around their $15 apiece debut.
Gemphire is built around commercializing gemcabene, an oral, once-daily drug that is meant to inhibit the production of fatty acids and modulate how the body clears metabolites. The company is developing gemcabene to treat statin-sensitive patients with high LDL cholesterol and will use the cash raised in the IPO to advance clinical testing, the company says.
In 2011, gemcabene was licensed from Pfizer by two of the pharmaceutical giant’s former executives, Charles Bisgaier and David Lowenschuss, who later launched Gemphire in 2014. Bisgaier and Lowenschuss played an instrumental role in getting the high-cholesterol drug atorvastatin (Lipitor) to market. Atorvastatin has gone on to become one of the best-selling drugs of the modern era, and Gemphire’s investors are likely hoping some of that lightning-in-a-bottle magic will rub off on gemcabene.
Stephen Rapundalo, who leads the trade organization MichBio, said that beyond common team members, there are other similarities between Gemphire and Esperion Therapeutics. Rapundalo, who worked with Bisgaier years ago at Parke-Davis, pointed out that atorvastatin was a languishing Pfizer drug until Esperion licensed it for further development.
“The decision had been made not to take it to market, but Roger [Newton, Esperion’s co-founder] kept battling them, saying there was something different about it,” Rapundalo said. “When they made the first year sales estimates, they projected [atorvastatin] would make $150 million. It made $800 million.”
Gemcabene similarly sat on the shelf until it was licensed from Pfizer by the Gemphire team. “Charlie and Mina are smart people; they wouldn’t have picked this up for IPO in a fairly short amount of time if the data wasn’t there to back it up,” Rapundalo noted.
“Mina” is Mina Sooch: serial entrepreneur, investor, and Gemphire’s president and CEO. Sooch is something of a savant when it comes to raising money to get Michigan biotech startups to market. Before moving to Gemphire, she was the driving force behind ProNAi, last summer’s Michigan biotech IPO but left the company before it relocated to Vancouver, BC, and went public.
ProNAi made a splash by raising $138 million in its IPO, but the company’s fortunes have since been unsteady. In June, ProNAi announced it would suspend development of its lead lymphoma drug after new clinical data showed only modest efficacy, and the company lost nearly half its value in one day of trading. After previously trading at a high of $17, ProNAi stock was sitting at $1.96 per share at the close of Tuesday’s stock market.
It’s hard to say how—or even whether—ProNAi has affected Gemphire. But Gemphire has a lot to prove before it can avoid a ProNAi-like fall from grace—namely standing out in a very crowded field of cholesterol lowering drugs both already on the market and in development. Gemphire’s drug is on the verge of three different mid-stage trials this year, with results expected in late 2016 and early 2017, meaning it’s got a long road ahead. Considering Gemphire had $1.6 million in the bank at the end of March, the IPO came in the nick of time. In its prospectus, Gemphire said the IPO cash would get it through at least two years, but “at least an additional $100 million” more is necessary to get gemcabene through clinical testing.
Ben Fidler contributed to this article.