Coley Pharmaceutical opens IPO price talk at $14 to $16 per share

By Ted A. Knutson

Washington, July 21 - Coley Pharmaceutical Group, Inc. gave the opening estimate of the price range for its planned initial public offering of common stock at $14 to $16 per share for 6 million shares in the fifth amendment to its S-1 prospectus filed with the Securities and Exchange Commission.

The greenshoe is 900,000 shares.

The Wellesley, Mass.-based drug development company estimated net IPO proceeds of $92.0 million to $104.6 million if the greenshoe is exercised in full.

Coley has a license agreement with drug giant Pfizer Inc. for the development and worldwide commercialization of its drug candidate ProMune, which is designed to help activate the body's immune system to fight cancer. Under the agreement, Coley Pharmaceutical has received a $50 million up-front payment and is scheduled receive up to $10 million in an equity investment concurrently with the IPO.

The company is also eligible for up to $455 million in milestone payments, a significant majority of which relates to potential development and regulatory approval milestones, and royalties on any future product sales.

Coley said it focuses on discovering and developing a novel class of drugs for cancers, infectious diseases and respiratory disorders. The firm's proprietary TLR Therapeutics act by stimulating a specific class of targets, called Toll-like receptors, or TLRs, found in and on immune system cells, which in turn direct the immune system to fight disease.

In addition to ProMune, which is in Phase II clinical trials, Coley has three other drug candidates. One of them is Actilon for infectious diseases, which is in a Phase Ib clinical trial.

Coley expects to spend $45 million of its IPO funds for the development of Actilon and $27 million to develop drugs for conditions other than cancer, infectious disease and respiratory disease with new TLR Therapeutic products. Another $20 million from the offering is seen going to general corporate purposes.

Merrill Lynch & Co., JPMorgan, Lazard Capital Markets and Leerink Swann & Co. are the underwriters.

In 2004, Coley had a net loss of $33.98 million on revenues of $14.34 million. Of the revenues, $5.96 million came from collaborative agreements and $8.38 million from government contracts and grants.

Entities affiliated with Thomas McNerney & Partners LP hold 3.41 million shares of the company, 18.24% of the pre-IPO total and 13.73% of the common stock after the offering.

Techno Venture Management holds 3.22 million shares, 17.31% of the pre-IPO common stock and 12.97% of the shares after the IPO is completed.

Venrock Associates is the third largest shareholder with about 2.94 million shares, 15.85% of the pre-IPO total and 11.87% of the post-IPO stock.

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