Argos Therapeutics succeeded in making its long-anticipated debut as a publicly traded stock Friday, but the Durham drug-development company didn’t raise as much money as it had hoped.
Argos priced its IPO shares at $8 each on Thursday night, well below the $13-to-$15 per share it had targeted.
The company’s stock initially was well-received by investors after it began trading shortly before 10:30 a.m Friday, opening at $8.90 and rising above $9.75. But the stock fell later in the day and closed at the IPO price of $8.
John Fitzgibbon Jr., who tracks new stock offerings for website IPOScoop.com, said of Argos going public at a lower price than it wanted: “The IPO market is a lot like Macy’s department store. If they put the merchandise on sale and it doesn’t sell, they mark it down.”
Fitzgibbon said there has been a wave of biotechnology companies seeking to go public recently, and this week the market “turned rocky” and more selective.
Of the seven biotech IPOs that priced this week, two companies – including Argos – ended up accepting less than their target price in order to go public, Fitzgibbon said.
“As you all know, it’s all about timing,” Argos CEO Jeff Abbey said Friday morning after the company’s shares started trading. “I was just talking to my VP of finance, and we were saying, maybe if we had gone out last week, we might have been at a different level.”
In conjunction with its pricing, Argos also sold significantly more shares than it had intended – 5.625 million shares, rather than the 4.25 million shares it had planned, according to the company’s securities filings.
Even with the sale of additional shares, the company raised significantly less money.
The company grossed $45 million from the stock sale, which doesn’t account for millions of dollars of underwriting fees and expenses stemming from the IPO. If it had been able to go out at $14 per share – the midpoint of its target price – it would have received gross proceeds of $59.5 million while selling fewer shares.
The underwriters have a 30-day option to purchase up to 843,750 additional shares of Argos stock at the IPO price.
Argos doesn’t yet have any drugs on the market. Abbey said that selling $45 million worth of stock is enough to see the company through the Phase 3 trials of its promising experimental treatment for kidney cancer. That’s the final stage of testing required before the company can seek regulatory approval to put the drug on the market.
“This money gets us into the latter part of 2016,” Abbey said.
Argos previously raised more than $180 million in venture capital. Its backers included two Triangle venture capital firms, Intersouth Partners and Aurora Funds.
This was the second time Argos tried to go public. It also filed plans for an IPO in 2011 but withdrew its plans in the wake of what was at the time a lackluster market.
“It has taken us a couple of years, but we got to where we wanted to be,” Abbey said. “It’s a tribute to the people that work here and the work that we are doing.”
Abbey said the 94-employee company planned to celebrate its IPO with a pizza party on Friday – but not with champagne.
“I think Argos is more of a beer-and-pizza crowd than a champagne crowd,” Abbey said. “There might be a little beer involved.”