Salk Company Files for First Stock Offering
Immune Response Corp., the San Diego biotechnology company co-founded by Jonas Salk that is trying to develop an AIDS vaccine, has filed for permission to hold an 2.2-million share initial public stock offering that could raise as much as $19.8 million.
The company is developing an immunotherapeutic drug for patients who have already contracted the HIV virus, the precursor to AIDS. Now in advanced clinical trials at several medical centers, the drug would stimulate those patients’ immune response systems to prevent the disease from progressing to full-blown AIDS, the company said.
The company now has no products on the market, and its AIDS immunotherapeutic drug still faces at least three years of clinical tests before it is eligible for federal Food and Drug Administration approval. Immune Response Corp.’s $3.3 million in 1989 revenue came from contract research payments.
Immune Response Corp. was founded in 1987 by Salk, James Glavin, who is now the company’s chief executive, and Dennis Carlo who is chief operating officer. Board chairman is William Sullivan, who in 1986 retired as chairman of Burroughs Wellcome, a pharmaceutical manufacturer.
In a filing with the Securities and Exchange Commission on Friday, the company said it plans to sell the shares at $7.50 to $9 each. All shares would be newly issued stock sold by the company. None of the offering’s shares would be sold by existing shareholders.
Immune Response Corp. had planned to go public last fall, announcing an initial stock offering of 3.3 million shares priced at $11 to $13 each. But the $40-million public stock sale subsequently was called off after the stock market soured.
The reduced size of the public offering as now planned is an admission by the company and its underwriters that current stock market conditions cannot support “a higher priced initial public offering at this time,” said Charles Cashion, vice president of finance.
A sale of 2.2 million shares would bring the total Immune Response Corp. outstanding shares to 11.1 million. At the median price of $8.25 a share, the offering would thus give the entire company a stock market value of about $91 million. Before the offering, the company had raised a total of $28 million through the private sale of equity to investors.
The company has been busy in recent months raising money by selling equity to institutional investors and by signing marketing and licensing deals with outside companies. Most recently, the company sold 1.4 million shares of its stock for $10 million to State Farm Mutual Automobile Insurance. After the stock offering, State Farm’s shares will represent a 12.9% stake in Immune Response Corp.
In August, 1988, the company sold a chunk of its stock to Rorer Group, a Ft. Washington, Pa.-based pharmaceutical company, for $10 million. The company’s largest shareholder, Rorer will own a 13.3% stake in Immune Response Corp. after the offering. Rorer is also Immune Response Corp.’s joint venture partner in its efforts to develop the AIDS vaccine.
Also in 1988, Immune Response Corp. sold an 8.1% interest in the company to Colgate-Palmolive for $5 million.
In February of this year, the company signed a manufacturing and marketing deal with Pasteur Vaccins and its parent Institut Merieux of France that will be worth at least $7.5 million over three years. The French firms will also pay the Immune Response Corp.-Rorer joint venture a total of $15 million if it successfully introduces the AIDS vaccine.
In exchange for its investment, the French companies received the right to market the AIDS vaccine in Europe, Africa and Latin America. The French companies will also be the worldwide manufacturer of the Immune Response Corp. drug, Cashion said.
Salk, 75, sits on the company’s scientific advisory board, its board of directors and is a consultant. He is “in regular contact with the company,” Cashion said.
The company now has 31 employees at its plant on Nancy Ridge Drive in the Sorrento Mesa area of San Diego. The company plans to move later this year to larger facilities in Carlsbad. Underwriters for the stock offering are Dillon, Read & Co., Merrill Lynch Capital Markets and Smith Barney, Harris Upham & Co.
