Billion dollar biotech: FibroGen sets terms for $124 million IPO

FibroGen, which is developing treatments for anemia and fibrosis using a protein inhibitor platform, announced terms for its IPO on Thursday. The San Francisco, CA-based company plans to raise $124 million by offering 7.1 million shares at a price range of $16 to $19. At the midpoint of the proposed range, it would command a fully diluted market value of $1.1 billion.

Even if FibroGen prices 15% below the midpoint, it would still be the largest biotech IPO in the past 10 years by diluted market cap, surpassing mid-October IPO Forward Pharma (FWP)

Business
FibroGen's lead candidate, roxadustat, is an oral small molecule inhibitor of HIF prolyl hydroxylases, or HIF-PHs, in Phase 3 trials for the treatment of anemia in chronic kidney disease, or CKD. Like close peer and March IPO Akebia (AKBE), FibroGen's treatment stimulates red blood cell production in the same way that a person's body would when adapting to high altitudes. It claims its drug is safer, more effective and more convenient than the current standard of care, injectable erythropoiesis stimulating agents. The market for a safe, effective oral treatment for anemia could be over $12 billion. Its second candidate is a monoclonal antibody in Phase 2 trials for the treatment of idiopathic pulmonary fibrosis, or IPF, pancreatic cancer and liver fibrosis.

FibroGen expects its CKD anemia program to be fully funded through the launch of roxadustat with potential non-contingent milestone payments of up to $900 million from Astellas and $1.6 billion from AstraZeneca. The company generated $121 million of revenue (87% licensing/milestone, 13% collaboration) during the nine months ended September 30, 2014, up from $90 million in the prior year period.

Competition
Primary competitor Akebia gained 57% on its first day, but on Monday plummeted 33% (now about 20% below the offer price) after it released Phase 2b mid-stage trial data. While efficacy was positive, the treatment group suffered serious adverse effects (24% compared to 15% for the placebo group), including one death that could be related to the drug. GlaxoSmithKline and Bayer are both in clinical development for similar oral HIF drugs.

Shareholders
Primary shareholders include founder, Chairman and CEO Thomas Neff and Tokyo-based Astellas Pharma. AstraZeneca has agreed to purchase $20 million worth of shares in a concurrent private placement.

Goldman: an uncommon biotech bookrunner
FibroGen may generate extra interest based on the fact that only one biotech in the last 8 years - recent IPO Atara Biotherapeutics (ATRA) has had Goldman Sachs as the lead underwriter. Atara priced below the range and broke issue on its first day, but now has a gain of more than 70%. Over the same time span, Goldman has been a secondary bookrunner on just three IPOs (SAGE, AGIOS, KYTH), each of which trade over 100% above the IPO price.

FibroGen, which was founded in 1993 and booked $134 million in license, milestone and collaboration revenue for the 12 months ended September 30, 2014, plans to list on the NASDAQ under the symbol FGEN. Goldman Sachs, Citi and Leerink Partners are the joint bookrunners on the deal. It is expected to price during the week of November 10, 2014.