Acucela Seeks $125M IPO in Japan to Develop Eye Drugs

Xconomy Seattle — 

[Updated: 7:40 am PT 12/18/13] Seattle-based Acucela is looking to raise as much as $125 million in an initial public offering to support its development of treatments against eye diseases.

Acucela today filed its IPO prospectus with the Securities and Exchange Commission, outlining plans to go public on the Tokyo Stock Exchange. It’s a logical place for Acucela to turn for investment capital, given that founder and CEO Ryo Kubota, 46, is a native of Japan. An ophthalmologist formerly with the University of Washington, Kubota has retained strong connections in his native country, and he has built Acucela with support of a key partner in Japan-based Otsuka Pharmaceuticals.

There are plenty of unusual tidbits about Acucela listed in its first big public disclosure. The offering lists just one underwriter, Mitsubishi UFJ Morgan Stanley Securities, although that group could grow over time. Kubota, who never turned to conventional U.S.-based venture capital to support the company, has personally retained an astoundingly high 44 percent equity ownership stake in the company heading into the IPO. Japan-based SBI Group has 29.3 percent, and Otsuka has 12.9 percent, according to the filing.

Ryo Kubota, Acucela CEO

Ryo Kubota, Acucela CEO

The company, unlike almost any other biotech in the R&D phase, operates at a modest annual profit because of its partnership with Otsuka. Acucela brought in $46.4 million in revenue in 2012, and turned a profit of $4.2 million that year, according to the IPO prospectus. But Otsuka recently terminated the funding it had provided for development of Acucela’s rebamipide after that drug failed in a Phase III clinical trial. Acucela responded by cutting 30 jobs, or about 35 percent of its workforce, and filing for the IPO. [Updated information about the Phase III failure and layoff.]

Acucela, founded in 2002, is seeking the additional cash to further develop new drugs for eye diseases like age-related macular degeneration, diabetic retinopathy, diabetic macular edema, and glaucoma.

The company’s lead product candidate is emixustat hydrochloride, which is in the third and final phase of clinical development normally required for FDA approval. The drug is being positioned as a treatment for the “dry” form of age-related macular degeneration, which currently has no FDA-approved therapy. The market for macular degeneration treatment is massive, as it’s the leading cause of blindness among elderly people worldwide. Acucela notes in its IPO prospectus that the worldwide market for ophthalmology drugs was $17.5 billion in 2011 and is expected to grow to $34.7 billion by 2023, according to Visiongain.

If Acucela can successfully win over enough investors to go public, it will be the second Seattle biotech company to take the plunge in the past 12 months. NanoString Technologies (NASDAQ: NSTG) was the other.