Xcel Pharmaceuticals Inc., a San Diego-based pharmaceutical company that withdrew its IPO filing earlier this year, has rebounded with $26 million in Series C private equity round of funding and $62 million in senior debt restructuring. Ferrer Freeman & Co. led the equity round and was given a seat on the company’s board of directors.
The equity and debt was used to repurchase 3 million shares of Series A preferred stock held by Elan Corp. and to retire $109 million of long-term debt owned to Elan via a one-time $89.5 million payment.
Xcel had filed for a $97.75 million IPO and had previously raised over $90 million in venture funding from such firms as Domain Associates and New Enterprise Associates.
“We filed an S-1 in January 2002, but we decided to withdraw it in the fourth quarter of last year because of the market conditions and because we had acquired two migraine drugs,” says Julie Bierle, the company’s spokesperson.
Founded in March 2001, Xcel Pharmaceuticals is focused on the treatment of disorders of the central nervous system (CNS). The company has four marketed products, two that are used to treat epilepsy and two that are used to treat migraines. The company touts a 96-person nationwide sales organization that promotes its products to epilepsy and migraine specialists. Xcel’s strategy is to increase prescription demand for its current products through targeted sales and marketing efforts and to leverage its presence through the acquisition of additional products and late-stage development product candidates.
Michael Borer, Xcel’s president and chief executive, is looking forward to Xcel’s future now that it has been restructured. “By completing this debt restructuring and raising private equity, we reduced our debt by over 43%, which reduced Xcel’s debt to equity ratio from 1.2 to 0.5. The reduction in our debt and strength of our business operations positions us to execute our strategic objectives of growing our current neurology products and acquiring additional products and late-stage development products.”
The company has been profitable since Q2 2002. Prior to that, Xcel certainly took in its fair share of venture capital. In March 2001, Xcel raised a $70 million Series A round of funding that was led by Domain and NEA. The firms then co-led the company’s Series B deal in June 2002, which closed with $22.5 million. Moreover, Xcel’s post-money valuation has increased with every round, including its last. “When we did the Series A, we had $100 million post-money valuation. Wit the second round we were looking at $140 million and this time our post-money valuation was north of $160 million,” says Bierle.