Key venture backers of Aldagen may find something extra in their cash-out envelopes if the small biotech company is successful with its plans for an initial public offering. Even as the company’s U.S. Securities & Exchange Commission registration statement was being drafted in April, Aldagen sold 17.6 million shares of preferred stock at $1.04 each to a group of its long-standing venture investors and their various affiliates, including Durham-based Intersouth Partners. Those preferred shares will convert to common stock on a 1-to-1 basis when Aldagen, formerly StemCo Biomedical, offers up its IPO shares – first to roadshow investors and then to the public, anywhere from $5 to $20 per share.
Founded in 2000, Aldagen focuses on using umbilical cord stem cells to treat metabolic and various other ailments. As yet unprofitable, the firm has made its way primarily by attracting venture capital investments. In fact, proceeds from venture deals made up a majority of the $51.5 million in cash the company had raised through April 2008, according to the SEC filing.
The company filed its registration statement May 9 and could begin trading within six months. In addition to Intersouth and its affiliates, which purchased nearly 6 million preferred shares in the April deal, other venture players included were Durham-based The Aurora Funds, which picked up an additional million shares in April; Birmingham, Ala.-based Harbert Venture Partners, which purchased 6 million more; Columbia, S.C.-based The Trelys Funds, which added 95,504 shares; and Greenwich, Ct.-based Tullis-Dickerson & Co., which picked up 2.4 million additional shares in April.
Aldagen’s IPO registration statement does not spell out how the company plans to use the additional $18.4 million it raised in the April stock transaction, but it does explain that the origins of the deal date back to September, when investors agreed to put more money into the company if it achieved certain “specified benchmarks”. The document doesn’t say what those benchmarks were.
What return the venture investors will get on their added 17.6 million shares of April stock depends, in large part, on the price Aldagen underwriters put on the firm’s IPO shares. One biosciences company, San Diego-based CardioNet, went public in March 2008 at $18 a share. But that firm makes a heart-monitoring device. Stem cells, by contrast, remain an untested frontier in biotech.
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