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It was not a good sign. Last night, Cumberland Pharmaceuticals priced its IPO at $17 a share, which was below the $19-$21 range. And, in light of this weakness, the stock is down 9 cents to $16.91 so far in today's trading.
Yet, Cumberland is a fairly solid company. Focused on specialty pharmaceuticals, it has several branded prescription products. The main target areas include: hospital acute care and gastroenterology.
A key differentiator is Cumberland's efficient direct sales model. In all, there are only 66 sales reps. Then again, because of Cumberland's laser focus, it is easier to target the market.
Revenues have been climbing nicely. From 2006 to 2008, they ramped from $17.8 million to $35.1 million. What's more, the company was profitable during these years (last year, the net income was $4.8 million).
So why the muted response from investors? Well, Cumberland is still a niche player. In other words, it will need to prove that it can scale into a major player. Although, it is encouraging that Cumberland got FDA approval for its Caldolor drug in June.
Something else: the fact remains that pharma IPOs have been out-of-favor. In fact, this is the first pharma IPO in 21 months.
The underwriters on the IPO included UBS Investment Bank (NYSE: UBS), Jefferies & Company (NYSE: JEF) and Wells Fargo Securities (NYSE: WFC).
Tom Taulli is the author of various books, including The IPO Primer and The Complete M&A Handbook
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