Biotech entrepreneur Alfred Mann is planning to combine three of his private biotech companies and take the combined entity public later this year, he told the Business Journal last week.
The three companies Chatsworth-based CTL Immunotherapies Corp., Valencia-based AlleCure Corp. and Danbury, Conn.-based Pharmace-utical Discovery Corp. will be operated as subsidiaries of the new public company, which is to be headquartered in the Los Angeles area.
"There is a lot of interest and synergy between them," Mann said of the companies. "It lets us create a very powerful and diverse pharma-company. We will take it public market willing some time in the late third or early fourth quarter."
So far, the market has been notably unwilling. Only 25 initial public offerings have been brought to market nationwide so far this year, according to IPO Monitor, a research firm. In L.A., the market has been completely dry since the first of the year not a single L.A. company has gone public in 2001.
Even more daunting for Mann is that biotech IPOs have been performing dismally. All but 11 of the 63 such companies that went public last year have seen their share price tumble. As a group, their market value is 27 percent below their combined offering value. Mann stressed that he remains cautious about proceeding with his plan, "but we want to be ready when the markets are receptive."
Of the three companies that Mann plans to combine and take public, two AlleCure and CTL are early-stage ventures. AlleCure is developing immunology products that help prevent and treat allergies and related disease conditions. AlleCure was founded on the work of Nobel Laureate Rolf Zinkernagel, who is on the AlleCure board.
CTL is working on a cancer vaccine. Its Chatsworth headquarters combines R & D;, manufacturing, drug testing and regulatory operations under one roof. The company is also developing diagnostic technology for the early detection of cancer.
John Simard, CEO of CTL, declined to comment on his company or on the potential IPO. Officials from AlleCure and PDC could not immediately be reached for comment.
While addressing gargantuan markets, the companies will have to mature before investors are wooed, analysts said.
"Biotech could be out in front in the IPO market (once the window reopens), but it depends on the maturity of the products and the opportunity they're working on," said Keay Nakae, a biotech analyst with Wedbush Morgan Securities. "Because it's Mann, investors will be willing to listen to the story, but at the end of the day, the story will have to stand on its own. The opportunity must be there."
As for Mann's third company, PDC, it seems to be standing on its own already. Founded in 1991, the company has been developing drug delivery technologies, with an emphasis on pulmonary delivery systems.
Together, these companies could evolve into the next MiniMed Inc., according to Ahmed Enany, executive director of the Southern California Biomedical Council. (Publicly traded MiniMed, a medical devices company founded and controlled by Mann, has a market value of about $2.4 billion. It generated a net profit of $43.2 million last year on revenues of $294.4 million.)
"(Mann) has the ability to pull a good IPO," Enany said. "He has a successful track record, and these companies have interesting technology that is applicable in cancer and allergies."
Mann does indeed have a solid track record. Over the past 30 years, he has built a biotech empire. Among his successes are Pacesetter Inc., a company he founded in the late 1960s and sold for $150 million. It became a leading supplier of pacemakers. MiniMed, the Northridge-based company that makes infusion pumps for diabetics, has been enjoying stellar revenue and earnings growth, and the Street has responded with enthusiasm.
Mann is also determined to put L.A. in the limelight by building a biotech center here. He has given hundreds of millions of dollars to fund biotech research at USC and UCLA. As chairman of the Southern California Biomedical Council, he works to bring together scientists, city officials and investors.
"As chairman, it's my objective to try to build (biotech) as another arm of our economy in greater L.A.," Mann said. "As we all know, you don't want to be too dependent on any one industry."
Historically, the IPO market for biotech companies has been weak in Los Angeles, in part, Mann said, because "there really hasn't been any effort or focus on the part of the VC community to fund efforts in the L.A. area. The major western focus of capital has been in the Bay Area."
However, the demise of dot-coms could mean that more capital will now flow into biotech.
"The market is probably improving, given the elimination of opportunities for VCs that were directed in the dot-com area," Keay said. "It has allowed earlier-stage biotech companies to attract more financing. As that happens, it increases the probability that they will get to the IPO stage."
Another obstacle to local biotech startups, Mann said, is that "there is not much in the way of available land to build facilities suitable for this kind of activity."
On the whole, though, Mann is optimistic about the L.A. market. In addition to AlleCure, CTL and PDC, he confirmed that he still has plans to take his Sylmar-based Advanced Bionics Corp. public "some time next year." The company has developed a cochlear (inner-ear) implant, and it is working on other biomedical devices.
"We're all trying to build this as an opportunity for our region," he said.
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