A biotech company that's attempting to commercialize an antibiotic developed by Eli Lilly and Co. has filed for an $86.3 million initial public offering.
Targanta Therapeutics Corp. two years ago bought the rights to Lilly's skin infection treatment, oritavancin. The company briefly had its headquarters in Indianapolis before moving it to Cambridge, Mass., last year.
Lilly will see a big payoff if Targanta succeeds. The company's IPO filing says it must pay the Indianapolis pharma giant $10 million when oritavancin receives its first regulatory approval, another $10 million when it receives its second, plus an additional $15 million in the first year sales exceed $210 million. Lilly also holds the rights to royalty payments tied to sales.
Lilly received $50 million upfront when it licensed the rights to oritavancin six years ago, spokesman Mark Taylor said. Rather than developing the product itself, the buyer, California-based InterMune, resold the rights to Targanta four years later.
The Indianapolis drugmaker once was a big player in antibiotics, Taylor noted, but in recent years has focused on areas such as cancer, diabetes and neuroscience. That left oritavancin an orphan drug.
"Licensing agreements are a good way to ensure that molecules that have some potential are able to continue development, so they don't just sit on the shelf," Taylor said.
Through a spokesman, Targanta officials declined to speak with IBJ, citing the Securities and Exchange Commission's mandatory quiet period for companies pursuing IPOs.
According to its IPO plans filed with the SEC, Targanta hopes to bring its first oritavancin-based drug to market by the end of this year. The filing says the drug has the potential to treat serious infections caused by the highly evolved bacteria strains that plague hospitals and other medical institutions. Such germs are resistant to current antibiotics.
As is typical for new drugs, development costs have been significant. The filing shows that, since its inception, Targanta has incurred cumulative losses of more than $61 million. So far, the company's costs have been underwritten by a syndicate of venture capitalists, none locally based.
Targanta is hoping the drug's sales potential offsets its expensive startup. The company claims in its filing that the annual U.S. market for antibiotics is $945 million-and growing fast.
BioCrossroads CEO David Johnson said Targanta's IPO plans further demonstrate Indiana's ability to produce life sciences research that can be the foundation of successful companies.
"It's a very promising sign that we have not only what it takes to get good discoveries started, but [also to] develop them and get them to market," he said.
Johnson hopes to see Targanta expand its Indianapolis operation. The IPO filing shows that former Lilly executives make up half of Targanta's 10-member management team.
John Barnard, managing director of the locally based life sciences venture fund Pearl Street Venture Partners, expects the Lilly veterans eventually will become angel investors. If the offering succeeds and Targanta takes off, he said, company principals will have millions of dollars to plow into other Hoosier life sciences startups.
He also anticipates Targanta's IPO will augment Indiana's reputation as a life sciences hot spot.
"If they can pull that off, that would be sensational," Barnard said. "It would be a real shot in the arm to the life science initiative here."
Targanta hired Credit Suisse to lead its IPO. The New York-based investment bank has become a big player in Indiana high-tech deals. It's the same firm responsible for managing BioCrossroads' $73 million Indiana Future Fund and the $155 million Indiana Investment Fund.