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WEDNESDAY, AUGUST 28, 2013

BIOTECH

Law firms vie for biotech clients amid IPO boom

25 companies in sector have recently gone public, boosting competition in field
biotech startup represented by Latham & Watkins LLP is gearing up to go public in November after months of consultation and planning with the Los Angeles-based global law firm, known for its familiarity with companies in the life sciences arena. The company, which has yet to formally announce its planned public offering, was previously represented by a well known New York firm. But in its quest to go public, it decided it wanted counsel from a firm that was more practiced in initial public offerings. After a tapered search, the company made the switch to Latham. This scenario is telling of how this years big surge in biotech IPOs has spurred increased competition among law firms trying to nab startup companies looking for representation. Latham has worked for a number of years with many of the biotech startups the firm is now taking public, said Alan C. Mendelson, co-chair of the firms life sciences industry group. A company is not going to switch to another law firm to be its counsel for an IPO because it wants to keep the firm its been working with throughout the process, Mendelson said. If a company does want to open it up and look for another law firm, it will likely look at just two or three law firms in the biotech space. IPOs in the life sciences sector have skyrocketed this year 25 biotechnology and pharmaceutical companies nationwide have gone public in the past eight months, raising more than $4.5 billion, compared to 11 in 2012 raising a total of $771 million, according to Dealogic, a financial analysis firm. A handful of others are in the pipeline. Market receptivity was just not there last year, Mendelson said. Only in the last few months have things started to turn in the right direction. Mendelson has advised on several IPOs this year, including representing development-stage biotechnology company OncoMed Pharmaceuticals Inc. in its July listing. The company, which specializes in cancer treatment, offered 4.8 million shares of its common stock to the public for $17.00 per share, raising $82 million. Big firms like Latham, Cooley LLP and Wilson Sonsini Goodrich & Rosati PC top the list for law firms representing biotech companies that have gone or are looking to go public. But smaller regional firms and sometimes boutiques can be attractive as well.

By Alexandra Schwappach Daily Journal Staff Writer

Bruce Feuchter, a shareholder at Stradling Yocca Carlson & Rauth PC, said small emerging growth companies will often look for a smaller firm that can be more flexible on the total cost of an IPO. Yes, we are smaller than many of the very large law firms representing emerging growth companies wishing to go public, he said. But we still do our share of IPOs. Feuchter said his firm currently has several high-quality companies building their business and infrastructure, gearing up to go public. In 2013 to date, Feuchter has had five medical device companies complete significant venture capital financings, and he anticipates that most of them will want to go public by 2014 or 2015. Emerging companies will sometimes work with a law firm during its very early growth stages but then select different counsel before going public, said Larry Watanabe, a San Diego legal recruiter. The switch is often to a law firm better known for its IPO experience. Its a constant struggle and frustration for those law firms, Watanabe said. Feuchter said his firm has been on both sides of this equation. Several years ago, a startup company that had been a client of Stradlings for years moved to another firm just before its IPO.

Bruce Feuchter, a shareholder at Stradling Yocca Carlson & Rauth PC.

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If small firms can combine proven expertise, connections in the market, the ability to control fees and a certain level of name recognition in the industry, they can often successfully vie for this business,
Diane Rifkin

The companies getting ready to go public that have had a very close relationship with us will usually stay with their well skilled law firm, he said. But you can be sure in this tough market they are subjected to a great deal of pressure from acquaintances at other law firms that would like the company to switch. Big firms with wide name recognition often have the upper hand when it comes to taking companies public. A small firm may be able to save a client money in the early stages, when often the work is not too complex, said Diane Rifkin, a recruiter with Rifkin Consulting in Orange County. However, at some point the client may need the services of a larger firm that has the skills and deep pockets to handle such a complex and sophisticated matter.

Because IPOs are risky and can sometimes fail, big firms are frequently in a better position to see a public offering through to the end. If there is a loss, a large firm is more likely to be able to afford the writeoff, as well as to consider supporting the next IPO from the same group, Rifkin said. But certain well connected boutique firms especially in the San Diego area, where biotech is prevalent can be just as suited to take a company through an IPO. Rifkin said that unless a client seeks to be associated with a big-firm name, such small firms stand a good chance of competing for start-up business. If small firms can combine proven expertise, connections in the market, the ability to control fees and a certain level of name recognition in the industry, they can often successfully vie for this business, she said. Stradling and San Diego-based Procopio, Cory, Hargreaves & Savitch LLP are among the smaller firms that have proven to be competitive in the IPO market. [Those firms] are extremely well-poised to work on such matters, she said. They are staffed enough to be up to the task, experienced in the relevant areas and smaller than firms such as Latham.

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