Osteoporosis drug developer Radius Health Inc. has withdrawn its registration for an initial public offering, and is likely to pursue additional private funding to fund late-stage trials for its lead program.

Cambridge, Mass.-based Radius formally applied for the withdrawal on Nov. 15, according to a document filed with the U.S. Securities & Exchange Commission. The company had registered for a listing on Feb. 6, with a goal of raising up to $86.3 million in its initial public stock sale.

The company will need to look for other ways to fund ongoing trials of bone-building drug BA058, a subcutaneously injected analogue of human parathyroid hormone-related protein, or hPTHrP, for osteoporosis. A Phase III trial of the compound began in April 2011, just as Radius was closing its $91 million Series C round Also see "Radius Raises $91 Million, Moves Toward Public Listing" - Scrip, 1 June, 2011.. The company also has a transdermal version of the product in Phase II, with a separate study in progress.

CFO Nick Harvey said the overall market circumstances for biotech IPOs has deteriorated over the past few months, with several short-term events contributing to the weak market conditions. Biotech indices have lost ground from early-autumn highs; the NASDAQ Biotechnology Index, for one, currently trades just over 10% below its October peak. Radius’ timing was especially bad in that Hurricane Sandy arrived in the midst of its pre-offering roadshow, delaying the process; a modest decline in stock prices following the election further cooled the firm’s prospects, Harvey said.

Radius had hoped to pursue a different path to shareholder liquidity. At the time of the Series C, the company conducted a reverse-merger with a publicly reporting shell company formed by its largest outside stakeholder, MPM Capital. That was intended to lay the groundwork for an unusual path to liquidity: The company planned to file a Form 10 with the SEC, allowing it to go public without conducting a traditional IPO.

According to MPM Managing Director Ansbert Gadicke, Radius shied away from the Form 10 route after regulators instituted changes to the process, following abuse of the procedure by Chinese companies. The process became “less attractive” for Radius, he said, and the company chose to file an S-1 for a traditional offering early this year.

Harvey said the company has no plans to extricate itself from its reporting requirements, despite the cost of filing financial documents regularly.

Instead, Radius likely could return to private investors for another equity round, potentially involving non-traditional investors. Harvey declined to speculate about a future round, noting that the company still is in a quiet period officially, but said it could attempt to bring in more capital through an event that is “not a public financing.”

Gadicke hinted at the possibility of another private round by pointing to a precedent. He noted that last week, diabetes drug developer Intarcia Therapeutics Inc. raised $210 million in a Series C round that includes $160 million in equity capital and $50 million in debt, also intended to support trials on a late-stage product Also see "Intarcia Forgoes Partnerships, Raises $210M In Equity And Debt Instead" - Pink Sheet, 15 November, 2012.. Intarcia’s CEO, Kurt Graves, also is chairman of Radius.

“Clearly, there’s a better market for large private investors than the IPO market,” said Gadicke, suggesting that Radius is likely to seek funding from institutional backers. Intarcia’s round included hedge fund operator The Baupost Group LLC, crossover investor Farallon Capital Management LLC, multinational fund operator Fidelity Investments and two unnamed institutional investors.

With Studies Ongoing, A Need For Cash

Wherever it seeks funding, Radius still needs it. The company reported that it had $35 million in cash and equivalents, as of Sept. 30. That’s only enough to carry it through the end of the first quarter of 2013.

Future research and development costs for the subcutaneous version of BA058 could exceed $120 million, including $92 million in clinical costs, according to a recent regulatory filing. Radius spent $11.4 million on research and development of the program during the third quarter 2012. Development of the transdermal version could cost as much as $46 million as well.

If approved, BA058 would become the second bone-building compound in the osteoporosis market, as opposed to compounds such as bisphosphonates that prevent resorption. Eli Lilly & Co.’s Forteo (teriparatide), another synthetic parathyroid hormone, was approved for sale in the U.S. in 2002, and generated $950 million in worldwide sales in 2011 Also see "After D-mab: Next-Generation Osteoporosis Drugs Focus On Building Bone" - Pink Sheet, 3 June, 2009.. Radius’ Phase III trial is designed to show BA058’s superiority to Forteo in preventing vertebral fractures, while producing greater bone-mass density at major skeletal sites with reduced incidence of hypercalcemia in the blood.

No delays are expected in the timeline for either program, provided Radius successfully obtains funding for both. Top-line Phase III fracture data on subcutaneous BA058 are expected in late 2014; the 18-month study is still enrolling patients. The six-month study of the transdermal version will generate mass-density data in the third quarter of 2013, Harvey said.

Although Radius has other programs in its pipeline, Harvey said it is focused primarily on its top two programs. The company owns the Phase II compound RAD1901 for hot flashes, as well as the preclinical RAD140, which has muscle- and bone-building properties.

Gadicke said the decision not to go public does not affect the likelihood of Radius being acquired, and added that Radius’ investors viewed the IPO “mostly as a financing tool” rather than a liquidity event. Valuation increases among IPO candidates generally have been modest in recent listings ([A#2012900208]).

After Canceling IPO, Radius May Tap Institutional Investors

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