Reduced IPO raises $48M

Tranzyme sets $4 share price

Staff WriterApril 2, 2011 

  • Based: Durham (with a research facility in Quebec)

    Business: Developing experimental drugs to treat gastrointestinal problems

    Founded: 1998; moved to Durham from Alabama in 2002

    Employees: 40

    Top executive: CEO Vipin Garg, 53 (2010 compensation: $396,599)

    Financial results: 2010 revenue, $8.5 million; 2010 net loss, $7.3 million

    Stock: Will trade on Nasdaq under ticker symbol TZYM

A Durham drug-development company raised nearly $50 million Friday on Wall Street after cutting the size of its proposed IPO to get the deal done.

Tranzyme previously filed plans with the Securities and Exchange Commission to sell 5 million shares at $11 to $13 each. After submitting revised terms on Friday morning, Tranzyme sold 13.5 million shares at $4 each in the initial public offering.

The stock is expected to begin trading Monday on the Nasdaq under the ticker symbol TZYM.

A successful IPO would reinforce this region's cachet as a hub for drug research. It's the first IPO for a Triangle company since SciQuest of Cary began trading in September.

The changes slightly reduced the amount Tranzyme was able to raise, about $48 million after expenses. That money will pay for further clinical testing of experimental drugs to treat gastrointestinal problems.

The earlier terms weren't generating enough interest among big Wall Street money managers, so Tranzyme officials and the company's investment bankers had to tweak the deal.

"Everything on Wall Street is for sale at the right price," said John E. Fitzgibbon Jr., publisher of IPOScoop.com. "They kept lowering the price until they found enough buyers.

"The good news is they got the deal done and raised the money they needed," he added. "Now they need to take that money and run with it."

Slashing the per-share price below $5 could hurt its appeal with some mutual fund managers and other large investors. And that could limit the stock's potential after the IPO, at least in the short term.

"It's an indication that the investing public is just not interested in the biopharma sector and what this company is about," said David Menlow, president of IPOfinancial.com.

Still, if Tranzyme produces positive results for its drugs, the shares will likely rise.

But Tranzyme is in a risky business, and its stock probably won't attract many conservative investors.

The company is testing a drug that helps restart the body's digestive functions after bowel or abdominal surgeries. Another promising medicine treats a stomach condition that afflicts diabetics. Both represent large potential markets, and Tranzyme has attracted larger pharmaceutical companies as partners, including Bristol-Myers Squibb.

But those drugs still require years of expensive clinical trials before Tranzyme can win approval from the Food and Drug Administration, and they could run into any number of roadblocks.

Meanwhile, Tranzyme is burning through cash for research. The company has raised about $60 million from venture capitalists and had about $17 million left as of Dec. 31.

The company, which has been run by CEO Vipin Garg since 2000, employs 40 people.

Garg declined to comment on Friday. Corporate officials are restricted from discussing the business during the IPO process.

alan.wolf@newsobserver.com or 919-829-4572

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