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Warburg Pincus-Backed Sophiris Biosciences Plans $75M IPO

Sophiris Biosciences Inc.’s story is one of immigration and, in a way, the pursuit of the American dream: It’s a Canadian-turned-American pharmaceutical company that’s using its newfound San Diego base to restructure and ramp up development plans for its drug that treats prostate enlargement.

Not long ago it filed for a $75 million initial public offering on the Nasdaq, and is finalizing its phase 3 clinical trial plans for its once-a-year injection to treat benign prostatic hyperplasia, a condition that affects more than half of all men over the age of 50.

Existing treatments include surgery and daily oral medications — so the aim of the company is to market its drug, called PRX302, to fit an unmet need.

But development for PRX302 began more than a decade ago. Sophiris was founded in 2002 as Protox Therapeutics Inc. in Vancouver, Canada, with science coming from the University of Victoria and Johns Hopkins University.

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The company relocated to San Diego in 2011, because the biotech market in Canada wasn’t strong enough, said Sophiris CEO Randy Woods. The company has since implemented a major reorganization, adding an all-star cast of San Diego biotech executives to steer the drug to commercialization.

“There are only 10 of us at Sophiris, but we have more than 20 drug approvals to our credit — and have also helped facilitate several successful exits,” he said.

Steadily Growing Market

Woods himself has a significant exit under his belt: He was previously president of NovaCardia, a pharmaceutical company focused on cardiovascular diseases that was acquired by Merck & Co. for $350 million in 2007. He is also a past chairman for San Diego biotech trade organization Biocom.

And Woods said he sees the vast potential of a drug to treat BPH. It’s a market that is steadily growing as the baby boomer population ages, he said. The market is valued at just over $1 billion today, growing at about 4 percent each year.

Woods said that Sophiris plans to get the first Phase 3 clinical trial up and running in the next few months, and then initiate a second clinical trial. It would then focus on developing a sales force to market directly to urologists.

This is contingent, of course, on the drug achieving success in testing and through the regulatory process — but the company’s backers are confident in its success, Woods said.

Global investment firm Warburg Pincus LLC has invested $28.4 million into Sophiris to date, and holds about a 40 percent stake in the company, Woods said. Overall, about $55 million has been invested in the company to date. If it goes through, the U.S. initial public offering will fund the phase 3 clinical trials for Sophiris.

But the company noted in its prospectus that it had an accumulated deficit of $73.7 million. It is already listed on the Toronto Stock Exchange, and trades around 22 cents a share.

California Has More Opportunity

“There isn’t a robust biotech market up in Canada so one of the largest investors in the company — Warburg Pincus — said the company ought to move it to California, where you have a much greater talent pool to move forward with the clinical development needed for the drug,” said Sophiris’ Woods.

Sophiris isn’t alone in its assessment that opportunities for biotech funding are greater in San Diego than in Canada. Take OncoSec Medical Inc., a San Diego cancer drug company that also relocated from Vancouver — also in 2011.

“Unfortunately, the Canadian biotech economy has suffered over the last 10 years because of limited successes,” said Punit Dhillon, CEO of OncoSec. “There haven’t been that many home runs, and the few companies that have had late stage products have failed, or just faded in terms to access to funding and other things.”

Though previously stymied by funding woes, Dhillon said OncoSec has raised about $20 million since moving to San Diego. It will ultimately need up to $300 million to push his drug through clinical trials, and gambles that it’ll be much easier to reach that target in San Diego’s life sciences community than in Canada.

“In Canada, we don’t lack on the innovation side, but it’s lacking in the infrastructure that leads to incubation and other startups being funded by venture capitalists or angel investors that’s critical at a development phase,” Dhillon said.

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