Ista Pharmaceuticals Again Scales Back Stock Sale Plans

Ista Pharmaceuticals Inc., which scaled back its initial public stock offering late last week, expects the stock to be priced even lower when the Irvine company goes public, according to a regulatory document filed Wednesday.

The shares, which once were expected to be priced between $13 and $15, probably will be priced at $10.50, generating about half the proceeds that Ista had anticipated.

The 8-year-old company, which is developing treatments for eye afflictions, initially indicated it hoped to raise more than $57 million when it went public. Last week, that was lowered to about $35 million. Now, Ista would generate $28 million under its revised IPO, according to the filing with the Securities and Exchange Commission.

“They’re going in the wrong direction,” said Richard Peterson, a market strategist for Thomson Financial Securities Data in Newark, N.J. “It’s a red flag for investors.”

Ista said it expects to offer 3 million shares of common stock at $10.50, down from $12 to $14 per share. Initially, the company said it planned to offer 4.5 million shares with a range of $13 to $15.

The SEC filing gave no reason for the revision, and executives could not be reached for comment.

The company’s reduced expectations are surprising in light of the strong appetite for biotech stocks, Peterson said. In the past four weeks, there have been a record 28 biotech offerings, nearly double the previous high. Also, the 61 biotech companies that have gone public this year are trading at 53% above their asking prices, versus an average of 24% for other IPOs, he said.

But 20% of companies going public this year have lowered the anticipated price of their shares twice before trading, Peterson said.

Ista may be “scaring away investors,” because it has no revenue or product on the market, said Peony Kao, an analyst at the Renaissance IPO Fund in Greenwich, Conn.

Ista also may simply be the victim of bad timing, said Tom Madden of IPO Monitor. Investors have become more cautious since the Nasdaq composite index fell 9.7% April 14.

“Before, [investors] were snapping up any IPO that was out there,” Madden said. “Now, they’re being a lot more selective.”

Ista is working on remedies for several serious eye conditions. The company’s leading product candidate is Vitrase, a treatment for diabetic retinopathy, the leading cause of adult blindness in the U.S., and vitreous hemorrhage, a sight-threatening condition.

Ista expects its shares to trade on the Nasdaq market under the symbol ISTA.