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The average return for the 54 drug developers that went public in the US during first three quarters of 2018 was 13.6% as of Oct. 1 versus 16.9% as of Aug. 31 for the 47 biopharma firms that launched IPOs during the first eight months of this year. September had seven new offerings after just two in August.
The seven biopharmaceutical firms that priced initial public offerings in the US in September brought the year-to-date total to 54 drug developer IPOs, showing that despite a decline in the average return, investors remain interested in new offerings.
The biopharma US IPO class of 2018 has an average return versus their initial offering prices of 13.6% as of Oct. 1 (see table below). That's a more than 3% drop from a month earlier, when the 47 drug developers that went public in the first eight months of this year had an average return of 16.9%, as of Aug. 31. Also, more than half of the companies that went public in the US were trading in negative territory as of Oct. 1 – 28 out of 54 – versus 26 out of 47 trading in the black at the end of August.
Still, returns remain higher than what investors are seeing from companies included in the Dow Jones Industrial Average, which was up just 7.8% year-to-date as of Oct. 1. But while the Nasdaq was up 13.8% year-to-date, the Nasdaq Biotechnology Index (NBI) was up just 9.1%, suggesting that newly public drug developers may be better investments – for now – than their already public peers.
The AstraZeneca PLC spin-out and antibiotic developer Entasis Therapeutics Holdings Inc., headquartered in Waltham, Mass., priced 5m shares at $15 each for $75m in gross proceeds on Sept. 25. The offering went to the market below a proposed $16 to $18 range and Entasis was the worst performer of the five biopharma firms that went public during the last week of September, closing at $10 per share on Oct. 1 – a 33.3% loss to IPO investors. (Also see "AZ Spins Out Entasis To Tackle Resistant Infections" - Scrip, 21 Jul, 2015.)
South San Francisco-based Sutro Biopharma Inc., which is focused on cancer and autoimmune diseases, closed down 2.3% at $14.65 on Oct. 1 versus its Sept. 26 offering of 5.67m shares at $15 each for $85m in gross proceeds.
Roivant Sciences GMBH urology subsidiary Urovant Sciences Ltd. – based in Basel, Switzerland and Irvine, Calif. – grossed $140m from the Sept. 26 sale of 10m shares at $14 each, which was at the bottom of the $14 to $16 range. IPO investors had a 14.6% loss as of Oct. 1 when Urovant's stock closed at $11.95.
New Haven, Conn.-based Arvinas Inc., which is developing drugs that degrade disease-causing proteins, grossed $120m from the Sept. 26 sale of 7.5m shares at $16 each – at the top of a proposed price range of $14 to $16. The stock held steady at $16.01 on Oct. 1.
Gritstone Oncology in Emeryville, Calif. sold 6.67m shares on Sept. 27 at $15 each – at the top of a proposed $13 to $15 range – to gross $100m to fund its tumor-specific cancer immunotherapy development. Despite the general enthusiasm for immuno-oncology, Gritstone IPO investors had a 10.3% loss as of Oct. 1 when the stock closed at $13.45.
Seven more biopharma companies have set terms for forthcoming IPOs in filings with the US Securities and Exchange Commission (SEC) since mid-September. Among the price setters:
Tiziana Life Sciences PLCalso proposed a relatively small IPO on Sept. 25 with the potential sale of 1.58m American Depository Shares (ADSs) at $10.25, which would gross $16.1m for the UK-based firm. Tiziana intends to start Phase I trials for its anti-CD3 monoclonal antibody foralumab (TZLS-401) in non-alcoholic steatohepatitis (NASH) and neurodegenerative diseases, such as multiple sclerosis, in late 2018 and early 2019. The compound was licensed from NovImmune SA in 2014 and the company in-licensed a second candidate from the Swiss firm at the start of 2017. (Also see "Deal Watch: Sanofi Begins 2017 By Ending Vaccine JV, Completing Swap With Boehringer" - Scrip, 3 Jan, 2017.) Tiziana's lead drug candidate is the CDK inhibitor milciclib, licensed from Nerviano Medical Sciences SRL in 2015, is being evaluated in various cancers in multiple Phase II studies.
Alzheon Inc.originally intended to raise up to $80m, according to its initial SEC filing in March, but pulled the offering altogether in May and then returned with plans for a $40m IPO in August. Now, the company has proposed the sale of 2.5m shares at $13 to $15 each in a Sept. 28 filing, which would raise up to $37.5m before the sale of additional shares to meet overallotments. Framingham, Mass.-based Alzheon is trying to raise cash for a Phase IIb trial of its Alzheimer's disease drug ALZ-801. (Also see "Alzheon IPO To Fund New Phase III Trialling Of Failed Alzheimer's Drug" - Scrip, 19 Mar, 2018.)
Bridgewater, NJ-based Osmotica Pharmaceutical Corp., which stands out among recent IPO pursuers as a revenue-producing biopharma firm, said in an Oct. 1 SEC filing that it will sell 8.3m shares at $14 to $16 each to gross up to $132.8m. The company specializes in the manufacturing and commercialization of complex generics.
There's nothing small about allogeneic chimeric antigen receptor T-cell (CAR-T) therapy developer Allogene Therapeutics Inc., which launched in May with $300m, raised another $120m in September, and said in an Oct. 2 SEC filing that it will price 16m shares at $16 to $18m each – an offering that would gross up to $288m before overallotments. The South San Francisco-based company has a large portfolio of off-the-shelf CAR-T therapies licensed from Pfizer Inc. that it plans to aggressively move through the clinic. (Also see "Deal Watch: Allogene Gets Pfizer's Off-The-Shelf CAR-T Program, $300m Series A Backing" - Scrip, 3 Apr, 2018.)
San Diego-basedEquillium Inc.said in an Oct. 2 SEC filing that it will sell 4.67m shares at $14 to $16 each, which would gross up to $74.7m for early to mid-stage clinical trials of Biocon Ltd.'s CD6 inhibitorAlzumab(itolizumab). Equillium, developing the asset as EQ001, is investigating use in graft-versus-host disease and asthma.
Five additional companies have filed paperwork with the SEC in recent weeks to support new IPOs, including:
Arog Pharmaceuticals Inc.in Dallas, Texas said in a Sept. 28 filing that it intends to raise up to $74.75m in a future IPO. Arog enrolled the first patients in August in two Phase III clinical trials for the oral pan-FLT3 inhibitor crenolanib in relapsed or refractory FLT3-mutated acute myeloid leukemia (AML) patients and the other in newly diagnosed AML patients. (Also see "Pipeline Watch – Updates From EULAR, EHA and ECNP" - Scrip, 25 Jun, 2018.)
Jerusalem-based Gamida Cell Ltd., which closed a $40m Series F round in mid-2017, said in a Sept. 28 SEC filing that it will raise up to $69m. (Also see "Venture Funding Deals: $688.8m In Financings From Avitide To Zai Lab" - Scrip, 11 Jul, 2017.) Lead product candidate NiCordis a cord blood cell therapy developed with the company's nicotinamide (NAM)-based cell expansion technology as a potential universal curative stem cell graft for patients in need of a hematopoietic stem cell transplant (HSCT). NiCord is enrolling patients with high-risk leukemias in a Phase III study with top-line results expected in 2020 and the cell therapy has a breakthrough therapy designation from the US FDA for this indication. Gamida Cell plans to report Phase I/II results in 2019 for NiCord in severe aplastic anemia.
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