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Case Study: Brazil
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Case Study: NitroMed
Edison Liu
Steve Holtzman
Corey Goodman
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Editor's Letter



This company launched its initial public offering after seeing promise in failure.

The Case: A few public offerings slipped through a barely open IPO window last fall. Hereís how one of those companies used its understanding of heart disease in African American populations to in-license a drug that had failed its earlier endpoints. The result has been a bank account fat enough to carry the company through the development of its lead compound.

“We have the B team out in front of the A team.” Thatís how veteran biotech investment banker and Acumen adviser Steven Burrill views the recent crop of initial public offerings. “Ideally you get the best companies you can. But thatís not how it works,” he adds. With companies lining up to go public, “the guys who have been trying to finance for the last couple of years are going out first.”

NitroMed (Nasdaq: NTMD), which specializes in treatments based on the infusion of nitric oxide, was a lucky one that made it out. The timing of the narrow IPO window was ideal for this company, already more than a decade old.

With biotech companies and investment bankers hungry for cash, the industry has been disappointed with the initial performance of the half-dozen or so IPOs that launched prior to Thanksgiving. This has been an inauspicious sign for renewed interest in new offerings; since late October, only a few weeks after the first firms debuted on the market, no biotech companies have filed with the U.S. Securities and Exchange Commission to go public. Although none of the IPOs saw a dramatic dip in stock price—which would have signaled a lack of demand for those new stocks—share prices eroded gradually over several weeks as the market remained preoccupied with economic recovery.

Like its peers that slipped through this IPO window, NitroMed isnít the strongest player, since it has only one drug in clinical trials and is unlikely to see revenue for at least a few years. The companyís lead product, BiDil, is a heart disease treatment that boosts the level of nitric oxide in African American populations, low levels of which tend to contribute to the relatively high rate of heart disease. With a new drug application already submitted to the U.S. Food and Drug Administration, NitroMed, when it went public in early November, was on track to submit its supplementary efficacy study data in 2004, hoping for approval within the next year and for product launch by 2006.


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» NitroMed