Drug-maker plans IPO

Though not profitable, Xanodyne has key products in pipeline

Business Courier of Cincinnati - by James Ritchie and Steve Watkins Staff Reporters, November 23, 2007

Newport-based health care company Xanodyne Pharmaceuticals Inc. plans to raise up to $86 million through an initial public stock offering.

The company filed plans with the Securities & Exchange Commission Nov. 9 to sell stock to the public for the first time.

Xanodyne, with annual sales of about $75 million, has not been profitable since it was founded in 2001. Through the first nine months of this year the company posted a net loss of $26 million on net sales of $56 million, according to its registration filing with the SEC. Since it was founded, it has lost $222 million.

But those losses occurred mostly because it has plowed its cash into research and new drug development, a costly proposition that's common to drug companies. Xanodyne spent $29 million on research and development in the first nine months of this year.

The key will be the drugs it has in the development pipeline. The company's hopes for now are pegged to three candidates:

* Zipsor, a capsule for pain, for which the company has submitted a new drug application to the U.S. Food and Drug Administration.

* XP12B, a modified-release oral tablet for reduction of menstrual blood loss in women with menorrhagia, which is in late-stage human trials. If approved, that would be the only pharmaceutical specifically for that. In a December 2005 interview, then-CEO William Nuerge said the product could bring $300 million to $500 million in annual revenues.

* XP20B, a modified-release oral tablet for pain, expected to enter late-stage human trials in 2008. That would be an extension of its Darvocet brand of pain reliever.

"If any of those end up being successful, it's probably enough to make the company successful," said Timothy Schroeder, CEO of CTI Clinical Trial & Consulting Services, a contract research and consulting firm in Blue Ash. "If more than one is successful, it could probably make the company very successful. They've diversified themselves to the point that if they don't have as much success as they want in one area, it's not as if the whole company fails."

It's only the second major local IPO filing since medical device maker AtriCure Inc. raised $50 million in its IPO in August 2005. Global Energy Inc. filed for a $350 million IPO in June that has yet to be completed.

Investors will have to do research

Because Xanodyne doesn't have a profitable history, investors will have to determine how likely it is that one of those products will be successful.

Zipsor is the closest to hitting the market, but that likely won't happen until mid-2008. That could hamper its offering.

"I think they should be closer to FDA approval if they want a widely accepted IPO," said Francis Gaskins, president of Los Angeles-based IPO research firm IPOdesktop.com. "But they need the money."