IPO Watch: Elixir Pharmaceuticals

Ann C. Logue | Dec 31, 2007 11:45pm EST | Comment

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Elixir Pharmaceuticals, Inc.
www.elixirpharm.com
Nasdaq: ELXR
Scheduled for the week of Jan. 14
$75.0 million estimated proceeds
$325.5 million estimated post-money valuation

Many of the illnesses that scourge our population are simply related to aging. We can survive so many of the things that killed our ancestors before they turned 40 that now, as we keep going decades longer, we suffer from metabolic breakdowns: diabetes, obesity, and ordinary old age. The easiest way to avoid these conditions is to die young, but that’s not really the best option. Elixir Pharmaceuticals, Inc. has no products on the market yet, but it has several in its R&D pipeline that could be interesting. Two compounds, Glinsuna and Metgluna, are both designed to treat Type 2 diabetes. Both are in Phase III clinical trials (to test safety and efficacy in clinical use), and the company hopes to have enough data to submit for approval in 2009. Other products, for diabetes, obesity, opioid-induced bowel dysfunction, and Huntington’s disease, are further behind in the process but could lead to a string of products into the next decade.

With no products for sale, it’s no surprise that Elixir has no revenue and lost about $20 million in 2006. This offering will give the company funding to continue its research and, it is hoped, to bring Glinsuna and Metgluna to market. It has a smart group of experienced health care venture capitalists on board: ARCH Ventures, MPM Capital, Oxford Bioscience and Physic Ventures. It’s a gamble, though: the company seems to have the right people in place and is looking at products that address huge market needs, but there’s no guarantee that anything will work properly, receive FDA approval, and interest doctors enough to write prescriptions.

As for longer-term prospects, if Elixir gets some of its products approved and accepted in the market, it will probably be acquired at a nice premium by a larger company.

Recent IPOs

Orion Energy Systems, Inc. (www.oriones.com; Nasdaq: OESX; Dec. 18; $388.5 million post-money valuation): Lighting represents a huge operating cost for industrial and commercial businesses. Figuring out ways to save energy without hurting productivity can save companies big bucks, and it can give them a nice talking point whenever asked about their green and sustainable practices. Orion designs, manufactures, and installs high-efficiency lighting systems. It generated $40.2 million in revenue for the fiscal year ending March 31, 2007. It was profitable on an operating basis but not net; one use of proceeds is paying down debt, which should give a nice boost to the bottom line. Among the selling shareholders is GE Energy Financial Services.

Gushan Environmental Energy Limited (www.chinagushan.com; NYSE: GU; Dec. 18; $804.5 million post-money valuation): Mao made one huge mistake in the Great Leap Forward: he didn’t add a profit incentive. With a little dash of capitalism, China has been modernizing at an alarming rate, and the country needs everything. Gushan Environmental Energy is trying to provide fuel through biodiesel, which is vegetable oil (including used cooking grease), converted for use in conventional diesel engines. It’s a cheap, independent source of power – and it’s a money maker. Gushan Environmental Energy had $33.4 million in net income on $98.3 million in revenue for the first nine months of 2007.

MEMSIC, Inc. (www.memsic.com; Nasdaq: MEMS; Dec. 13; $237.9 million post-money valuation): MEMSIC designs MEMS, or micro electric-mechanical systems, which are semiconductors that measure shock, vibration, and other changes in motion. The chips are used in applications ranging from touch sensors in mobile phones to earthquake detection. Most of the manufacturing is contracted out, but not all, and one of the uses of the funds from this offering is expansion of a manufacturing facility in China. MEMSIC is profitable and earned $4.7 million in net income on $18.8 million in revenue for the first nine months of 2007.

Intellon Corporation (www.intellon.com; Nasdaq: ITLN; Dec. 13; $183.0 million post-money valuation): The ordinary tract house has IT needs that even IBM didn’t just a few decades ago. We live with home offices, home entertainment centers, and smart appliances that can be networked together for full functionality. Fishing wires is really tedious, though, and the standards change so quickly that not everyone wants to bother. Just about every house in America is wired for electricity, though, and Intellon designs integrated circuits that enable existing wiring to transmit data. The company has some revenue from sales to OEMs - $36.6 million for the nine months ending Sept. 30, 2007 – but it isn’t making money. This was a tough deal. It was priced at $6.00, the low end of a revised range of $6.00 to $7.00. The original filing range was $9.00 to $11.00