Durham’s Novan files for IPO to develop dermatology products

A Durham pharmaceutical startup staffed and advised by prominent North Carolina and national business executives plans to raise a potential $60 million in an initial public stock offering.

Novan made the filing Wednesday with the Securities and Exchange Commission, and will determine the specific amount to be raised at a later time. The skin products company has no products on the market and is developing dermatological treatments for five conditions, including acne, genital warts, toe nail fungal infections and psoriasis.

Novan’s board chairman is Robert Ingram, 73, a general partner in Hatteras Venture Partners in Durham and the former CEO of GlaxoWellcome, the predecessor of GlaxoSmithKline, one of the world’s largest pharmaceutical companies. Novan’s former chairman and founding investor is F. Neal Hunter, the former CEO and co-founder of Cree, the Durham LED lighting company.

Novan board members include W. Kent Geer, 62, a retired partner with Ernst & Young and a former board chairman of PowerSecure International, which was acquired in May by multistate electric utility Southern Co. Robert Keegan, 69, is a former CEO of Goodyear Tire & Rubber Co., and serves on the board of Duke University’s Fuqua Business School and Duke’s Heart Center.

Board member John Palmour, 55, is a Cree vice president and has served on Cree’s board for 15 years.

The company’s chief medical officer, M. Joyce Rico, 62, is on the board of directors of the American Dermatological Association and Society for Investigative Dermatology. Jeff Hunter, 59, vice president of technical operations, was named in 2015 to the board of directors of the N.C. Biotechnology Center.

Novan was founded in 2006 as a spin-out from UNC-Chapel Hill by UNC chemistry professor Mark Schoenfisch and his graduate student Nathan Stasko, now the company’s president and CEO.

Novan, with three products in clinical trials, lost $11.4 million in 2014, lost $28.1 million in 2015 and has lost $29.2 million in the first six months of 2016.

The 63-employee company has raised more than $100 million from private financing since 2011 and about $15 million in government grants and contracts.

Stasko, 36, was paid $519,518 in salary and bonus last year as CEO. Chief financial officer Richard Peterson’s executive compensation package was $864,074, and chief commercial officer Brian Johnson was paid a total of $744,534. Hunter, who stepped down as board chairman in February, received $268,641 in cash and options.

In its filing, Novan indicated its treatment, based on nitric oxide, could disrupt the global $28-billion dermatology market.

“Despite the size of this market, innovation in medical dermatology has been largely stagnant for decades,” according to the SEC filing. “For example, the widespread use of antibiotics and retinoids to treat acne vulgaris has been unchanged for over 30 years.”

This story was originally published August 25, 2016 at 12:02 PM with the headline "Durham’s Novan files for IPO to develop dermatology products."