Black Diamond doubles in value hours into Nasdaq debut, marking hot start to the 2020 IPO run
There are few allosteric therapies approved, but investors seem to like the idea — and the latest duo to pursue it.
Black Diamond Therapeutics, the young oncology company from Tarceva vets David Epstein and Elizabeth Buck, opened its IPO yesterday at $19 per share. By 11:15 am, it was up to $35 per share. And, with a slight rise in the last minutes, it closed at $39.48. That’s a 108% increase on its opening tender. They collected over $200 million. The market cap doubled from around $670 million to $1.3 billion.
On Friday, right on the heels of that quick coup, Arcutis Biotherapeutics priced its IPO at $17 — the top of the range. That offering raised $159 million through the sale of 9.4 million shares. It’s starting out with a market value of $657 million.
The end-of-week surge suggests that despite some headwinds investors still want to get in early on what they deem the most promising companies, particularly in oncology. That bodes well for the start of the 2020 IPO season and will likely inspire others to jump into the game early — though there’s no way to predict what will happen down the road. The biotech IPO window has been wide open for 5 years now, marking a very long stretch.
Black Diamond’s first-day gain dwarfed the mean for biotech IPOs. Since the start of 2019, they’ve risen on average 16% on day one and 60% overall, according to Renaissance Capital.
Black Diamond had raised money rapidly in the private markets as well. They were the first company to come out of Versant’s Basel-based incubator and launched with an initial $20 million from the venture firm. Within a month of emerging from stealth mode in December 2018, they announced an $85 million Series B funding. Less than a year later, they netted another $85 million. They then immediately filed for an IPO.
Buck and Epstein are far from alone in pursuing allosteric therapies for cancer and other diseases. Novartis has a Phase I program for an allosteric SHP2 inhibitor, Revolution Medicines — now pursuing its own $100 million IPO – has an allosteric SHP2 it licensed from Sanofi for $50 million, and back in 2016, Gilead paid Nimbus $40o million for firsocostat, an allosteric inhibitor for NASH. (Which did not perform well last year).
Black Diamond is behind those other programs. They have yet to enter the clinic.
Investors are largely betting on their MAP platform, which works to map out allosteric mutations across the body. Allosteric sites are grooves away from a protein’s active binding site but which can nevertheless affect the binding site and the protein’s overall function. A mutation there could affect the protein’s function, potentially driving certain cancers. Scientists have long known about these sites, but have struggled until recently to find them.
A company with promising mapping software could have a significant leg up. Another biotech trying to do that, Hotspot Therapeutics, launched in 2018 with a $45 million Series A.