This morning I saw Esperion Therapeutics (NASDAQ: ESPR) scroll by on the CNBC ticker tape and did a double-take. This biotech company was one of my better investments in the early 2000s and it was ultimately acquired by Pfizer (NYSE: PFE) for more than $1 billion in 2004. Since I knew the original Esperion was no longer public, I just figured a new company had taken its old ticker symbol, ESPR, and the company name had not yet been changed on the ticker tape. However, a quick Google search uncovered that Esperion Therapeutics completed its second IPO today, and the stock opened for trading $3 above its initial offer price of $14 per share.
So what on earth is going on here? Leveraged buyouts will often re-IPO after being taken private, but in the biotechnology space this is truly rare.
The original Esperion Therapeutics developed a cholesterol-lowering drug, ETC-1002, with the help of former scientists from Warner Lambert, the company that discovered the blockbuster cholesterol medication Lipitor. Early clinical trial data for ETC-1002 was promising, and Pfizer (which has previously acquired Warner Lambert) shelled out nearly $1.5 billion for Esperion in 2004 to possibly hedge its product portfolio when Lipitor lost its patent protection.
The drug, however, never duplicated its early success in later trials and Pfizer eventually abandoned its rights to ETC-1002 in 2008. In the same year, Esperion's former management team started another company, again called Esperion Therapeutics, and re-acquired the rights to ETC-1002 from Pfizer. Evidently it was not willing to give up on it as easily as Pfizer.
So today, five years after one of the largest drug companies in the world determined the drug was not worth the time and money for more testing, Esperion Therapeutics is going public again, with the same CEO and same product it had when it originally IPO'd in 2000. The new company's investors are not drug companies (not surprisingly given Pfizer's disinterest) but rather private investment companies. That should be a red flag for investors.
After its first-day pop, the new Esperion is valued at more than $200 million. The odds of this drug being a successful commercial product, after nearly 15 years of development and abandonment by Pfizer, seems remote. It is understandable that the original scientists who discovered it would want to see it through until they were absolutely convinced, but they might not be the best judges of its true potential given its long history and emotional attachment to the drug. As a result, I would suggest to investors that ETC-1002 is unlikely to ever be approved by the FDA. Given that it is Esperion's only product in clinical trials, this IPO is certainly one to avoid in my view. In fact, it seems like a solid short candidate for the long term.