Achillion Pharmaceuticals Inc. early this month filed a registration statement with the Securities and Exchange Commission for an initial public offering, which may be the company’s only hope for survival, officials admit.
The New Haven company is under financial duress, and in its own words, needs a successful IPO to remain in business. It has stated, for instance, that it has accumulated losses of $96.2 million.
And Achillion has had an average loss of $15 million per year for the past three years.
A company statement made to the SEC says, “Our independent accountants have expressed substantial doubt about our ability to continue as a going concern.” However, executives stated that they believe that the successful completion of the IPO will eliminate that doubt.
The company’s proposed maximum aggregate offering is $75 million.
Though Achillion is facing difficult times, investors still could be interested in the IPO, according to some financial observers.
“A lot depends on the value of the intellectual property,” said James Barrett, a partner at Edwards, Angell Palmer & Dodge who represents venture capital funds as well as biomedical and information technology companies. “In the bio sector, no one knows what the future holds and if they have promising technology, there could be support. They are targeting a large potential market.”
Achillion, founded in 2000, is a biopharmaceutical company focused on the discovery of treatments for infectious diseases. Company officials say the entire market, which includes HIV, hepatitis and bacterial infections, is estimated at $32 billion.
Achillion has at least three compounds in development. The size and visibility of this market has drawn many other players, and Achillion will face strong competition if its compounds are approved for sale.
The filing states that if the compounds are approved, the company will compete against drugs marketed by global corporations such Merck, Pfizer, Roche, Bristol-Myers Squibb and Johnson & Johnson.
Achillion executives are constrained from commenting, due to the “quiet period” prior to the event.
Charles Lax, a venture capitalist with GrandBanks Capital, expressed skepticism about investing in life-sciences companies that are facing such obstacles.
“It’s like the late ’90s, when companies had no revenue, no prospects yet were attracting capital,” said Lax. “This company might have good science and good product, but pharma companies need a lot of baking in the oven before they are real. We have learned that bubbles do burst.”
