Durham's Aldagen files for IPO

Durham drug company Aldagen has filed for an initial public offering of its stock, according to a Securities and Exchange Commission filing.

The company, which is developing drugs based on adult stem cells, did not disclose the potential size or price range of its IPO. Aldagen did say it could raise as much as $80.5 million in the offering, though that number is an early estimate and is subject to change.

After being isolated from bone marrow or umbilical cord blood, the stem cells Aldagen collects can be used for a variety of treatments. The company's lead drug, ALD-101, would improve blood transplants in pediatric patients with inherited metabolic diseases.

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Other drugs could help patients with childhood leukemia, damaged heart muscles or blocked extremities.

The IPO filing comes on the heels of an $18.5 million round of venture capital Aldagen closed on in April. The company says it will use the proceeds of its IPO for the entire drug development process - completing trials of its four drugs now in human testing, improving manufacturing operations and commercializing any product candidates that win regulatory approval.

Any money left over would go to general corporate purposes, Aldagen says.

An IPO also would give Aldagen's heavily local slate of investors an opportunity to cash out of their stakes in the company. Durham's Intersouth Partners, for example, is by far the largest shareholder in Aldagen. It owns 41.6 percent of all stock.

Spokeswoman Suzanne Cantando said Intersouth couldn't comment on the IPO filing.

Other major local investors in Aldagen include The Aurora Funds of Durham, which holds 12.3 percent of the stock, and the Treyls Funds in Durham, which owns 5.4 percent of the company.

Aldagen, which has 18 employees, lost $6.7 million in 2007, it said. It had $7.5 million in cash and cash equivalents at the start of the year, prior to the $18.5 million fundraiser, and burned through nearly $6 million during 2007 with the expectation that costs would rise during 2008.

Cowen & Co. and Wachovia Securities would act as lead underwriters for the IPO. Aldagen plans to trade on the Nasdaq Global Market using the ticker ALDH.

If its IPO is successful, Aldagen would be the first local drug company to go public since Durham's Icagen pulled off the feat in 2005.

Two Triangle drug concerns - Pittsboro's Biolex and Research Triangle Park's Talecris Biotherapeutics - have recently attempted an IPO. But Biolexput its plans on holdin February, citing poor market conditions. Talecris has yet to price an offering it filed for in July 2007, and it hasn't updated its IPO documents since December.

A tough credit environment has made it hard for companies to go through with their public offerings. The problem is doubly complicated for early-stage drug companies, which are risky investments because they have no products and little revenue.

There was just one U.S. biotechnology IPO in the first quarter - that of Bioheart Inc., a small Florida company making treatments for heart damage. Bioheart's stock, priced at $5.25 when it went public, was trading for around $3.65 on Monday.

John Fitzgibbon Jr., founder ofIPOScoop.com, says Aldagen is moving forward into those strong winds.

"Aldagen is a little bit ahead of the curve at this moment," Fitzgibbon says. "... But by going ahead and filing the papers, they're getting themselves set to go public at some point in the future. Just because they filed doesn't mean they expect to price the deal tomorrow. The fact is, they have put their foot in the door, and they've got it out in the open, and they're waiting for developments."

Fitzgibbon says he's been encouraged by steadiness in the stock market, which hit its nadir in early March and has since recovered somewhat. If market conditions improve, he says, that will make Aldagen's IPO more promising.

"Subprime, the dollar, oil, food - you name it, it's been there," he says. "And the encouraging thing is, (the market) has taken this news pretty well. It's had every excuse to really get pounded, but it hasn't."

Ed Field, chief operating officer of Aldagen, said he couldn't comment on the IPO. Executives at companies looking to go public are restricted by securities regulations on what they can say about their firms' offerings.