CAMBRIDGE — A month after shelving plans for an initial public offering because of what it called volatile market conditions, Radius Health Inc. is weighing other ways to raise the roughly $55 million needed to take its experimental osteoporosis drug through the next stage of development.
While the nine-year-old biotech still may seek to go public, chief executive Michael S. Wyzga said he also has begun talking to private investors about a new round of financing and is considering selling part of the company to a larger firm.
“People get all jazzed up about an IPO, but it’s just a capital-raising event,” said Wyzga, a former Genzyme Corp. chief financial officer who took the helm at Radius at the end of last year. “Whether you raise capital through an IPO or some other way, there’s still a lot of work to do. The important event for a company is not an IPO but when you have a drug that can help patients.”
Only a small number of biotechnology companies have successfully taken their stock public this year, including Verastem Inc., a Cambridge cancer drug maker that raised $55 million in an IPO in January. Shares of Verastem have tumbled more than 40 percent since their peak in March.
In past years, there was strong investor appetite for biotechs that had drugs in the late stages of development. But price pressures from insurers and risk aversion by the Food and Drug Administration, which approves drugs in the United States, has altered that calculation, said Kevin Gorman, managing partner at the Burlington consulting firm Putnam Associates.
“The bar is higher now,” Gorman said. “So much depends on how receptive the market is at any given point and what a company has in the development pipeline to give the public markets or a strategic investor a high degree of faith that it’s a reasonable investment.”
Radius in February filed its registration for an IPO, saying it wanted to raise $86 million. Its experimental drug is a bone-building compound that will compete in a market for osteoporosis treatments that is estimated at $6 billion annually. Radius is in late-stage clinical trials with a version of the drug that can be injected beneath the skin and is working on another version that would be administered through an adhesive transdermal patch.
‘The important event for a company is . . . when you have a drug that can help patients.’
An estimated 200 million women and 30 million men suffer from osteoporosis, a bone disease that makes them vulnerable to debilitating hip, neck, and back fractures. While existing treatments work to slow bone loss, a new generation of medicines from Radius and competing companies, including Amgen Inc., seek to strengthen bones and prevent fractures.
“It’s a gigantic market, and we’re well positioned,” said Wyzga, who expects the injectable version of its drug to be available in 2016, with the patch version coming 12 to 18 months later.
Radius had been preparing for its IPO at a particularly volatile time for financial markets. Wyzga flew to New York to make a final round of presentations to investors on Oct. 29 before pricing shares on Oct. 31 for the public offering.
Both events were postponed a week because of Hurricane Sandy. On Nov. 7, just as Radius was poised to uncork its IPO, the financial markets tumbled on post-election fears of an impending debt crisis in Washington.
Ultimately, the Cambridge company disclosed on Nov. 15 that it had pulled its IPO.
Wyzga said Tuesday that the decision to withdraw the registration, approved by the company’s private equity investors — including Bain Capital-owned Brookside Capital, Wellcome Trust, and MPM Capital — was driven by “choppiness in the market,” not problems at the company. But he acknowledged that in filing for the public offering, Radius had imposed a “quiet period” on its executives, required by the Securities and Exchange Commission, that made it hard for them to raise the company’s profile among potential investors this year.
He said Radius hopes to disclose a new source of funding early next year.Robert Weisman can be reached at firstname.lastname@example.org.