Can­did Truths From A Biotech IPO


Tak­ing a biotech com­pa­ny pub­lic is a com­pli­cat­ed jour­ney with nu­mer­ous chal­lenges. On the heels of Anap­tys­Bio’s suc­cess­ful IPO ear­li­er this year, John Car­roll asked me to share some can­did truths from the per­spec­tive of a biotech CEO that has lived through the twists and turns of the IPO process. Be­low are my first-hand ob­ser­va­tions, writ­ten as friend­ly ad­vice to any biotech CEO eye­ing the pub­lic mar­kets:

TTWs Are Your Friend
Al­most every pre-IPO biotech is like­ly to fit with­in the emerg­ing growth com­pa­ny de­f­i­n­i­tion of the JOBS Act, which al­lows you to con­fi­den­tial­ly pitch your po­ten­tial fu­ture IPO to po­ten­tial in­vestors that are al­lowed to pro­vide high-lev­el feed­back re­gard­ing their in­ter­est. These con­ver­sa­tions, called Test­ing-The-Wa­ter Meet­ings (TTWs), are the sin­gle great­est tool in your IPO tool­box. TTWs al­low you to de­vel­op re­la­tion­ships with in­vestors, un­der­stand which are like­ly to in­vest in your IPO and how they view you rel­a­tive to com­pa­ra­bles. The biggest mis­take you could make is not to take ad­van­tage of this op­por­tu­ni­ty to ed­u­cate po­ten­tial in­vestors about your val­ue dri­vers, and show them your progress over time to­wards key mile­stones. Know­ing your sto­ry in ad­vance will help in­vestors make an ed­u­cat­ed de­ci­sion dur­ing the lim­it­ed time­frame of the IPO road­show. Be­fore launch­ing our IPO, we at Anap­tys­Bio con­duct­ed ap­prox­i­mate­ly 100 TTWs across 40 dif­fer­ent well-known pub­lic mar­ket biotech in­vestors.

ECM Is The Epi­cen­ter
Ir­re­spec­tive of which in­vest­ment banks you choose to use, the most im­por­tant fac­tor in the ex­e­cu­tion of your IPO will be the Eq­ui­ty Cap­i­tal Mar­kets (ECM) per­son(s) in your syn­di­cate. It is easy to over­look ECM peo­ple be­cause they will not be the most vis­i­ble, bois­ter­ous or well-coiffed mem­bers of the bank­ing team. But make no mis­take, ECM peo­ple are specif­i­cal­ly re­spon­si­ble for in­ter­act­ing with in­vestors, and will there­fore have the best un­der­stand­ing of what the mar­ket thinks of your sto­ry. You need to work with an ECM crew that is dili­gent­ly work­ing on your com­pa­ny’s be­half, is not dis­tract­ed by oth­er pri­or­i­ties and can pro­vide hon­est feed­back with­out sug­ar coat­ing. Keep that in mind as you eval­u­ate in­vest­ment banks.

Cross-Overs Mat­ter
A pre-IPO pri­vate fi­nanc­ing round with heavy par­tic­i­pa­tion from pub­lic mar­ket in­vestors, known as a cross-over round, is a big con­fi­dence boost to any biotech IPO. Da­ta shows that com­pa­nies with a cross-over round built bet­ter IPO or­der books, were more like­ly to suc­cess­ful­ly price with­in their IPO price range and have trad­ed bet­ter once pub­lic. It is dif­fi­cult to know whether it is ac­tu­al­ly the cross-over round that makes the IPO more suc­cess­ful, or that the qual­i­ty of the com­pa­nies able to at­tract a cross-over round would have had bet­ter IPOs any­way – but in ei­ther case a cross-over is high­ly rec­om­mend­ed. The re­al rea­son you want to do a cross-over round is to in­crease the po­ten­tial in­sid­er par­tic­i­pa­tion in your IPO raise – which back­stops your risk of not be­ing able to build an IPO book through the road­show. Think of it as in­sur­ance – you give up some di­lu­tion pri­or to the IPO but dra­mat­i­cal­ly in­crease your chance of get­ting the com­pa­ny pub­lic.

The Win­dow Is Gen­er­al­ly Ajar
You will hear many peo­ple spec­u­late about whether the pub­lic mar­ket is cur­rent­ly “open” or “closed” for IPOs. It is a mis­nomer to be­lieve that that the mar­ket, and specif­i­cal­ly in­vestors in­ter­est­ed in IPOs, are that bi­na­ry. While I agree that cer­tain pe­ri­ods are not a good time to launch an IPO (e.g. Sep­tem­ber/Oc­to­ber 2015 right af­ter Hillary’s fa­mous tweet), in­vestor ap­petite for your new is­suance will be dri­ven far more by the qual­i­ty of your sto­ry than mar­ket tim­ing. Hence the IPO win­dow is gen­er­al­ly “ajar”, mean­ing that in­vestors are al­most al­ways on the look­out for qual­i­ty in­vest­ment op­por­tu­ni­ties ir­re­spec­tive of macro mar­ket noise. Ed­u­cat­ing them in ad­vance through co­pi­ous TTWs (see above), and fo­cus­ing on clin­i­cal da­ta cat­a­lysts (see be­low), can shield your IPO against wob­bly mar­ket con­di­tions.

Nav­i­gate to Clin­i­cal Da­ta
Pub­lic mar­ket in­vestors are gen­er­al­ly look­ing for a tan­gi­ble path to post-IPO val­ue in­flec­tion points, which for most biotechs means clin­i­cal da­ta cat­a­lysts. The longer it takes for an in­vestor to un­der­stand what, when and how you will gen­er­ate mean­ing­ful clin­i­cal da­ta, the more like­ly they are to dis­en­gage. The pri­ma­ry fo­cus your IPO pitch ought to be on your most ad­vanced pro­gram(s) and their prox­i­mal clin­i­cal read­outs, where “prox­i­mal” means the next 18 months. A longer hori­zon to clin­i­cal da­ta is like­ly to im­pact your in­vestor ap­peal.

Al­lo­cate For The Long-Term
As you de­vel­op re­la­tion­ships with pub­lic mar­ket in­vestors, you need to un­der­stand who is like­ly a long-term in­vestor that will buy IPO shares and hold them through thick and thin, ver­sus who has a short-term mo­men­tum men­tal­i­ty that will lead to dis­ap­pear with small gains (or loss­es) short­ly post-IPO. While every in­vestor is en­ti­tled to their own strat­e­gy, biotech com­pa­nies are gen­er­al­ly best served by pa­tient cap­i­tal that can help build val­ue over time. The per­for­mance of your stock post-IPO will heav­i­ly de­pend up­on what pro­por­tion of your IPO buy­ers are long-term ver­sus mo­men­tum. IPOs filled with mo­men­tum play­ers are more like­ly to “break is­sue” short­ly af­ter pric­ing and find them­selves in a tough spot for ex­tend­ed pe­ri­ods of time. Fig­ure out which in­vestors are most­ly like to take a long-term view, fo­cus on con­vinc­ing them to par­tic­i­pate in your IPO or­der book and al­lo­cate as many IPO shares to them as pos­si­ble.

The CEO Ref­er­en­dum
While you may have dealt with VCs dur­ing your pre-IPO life, pub­lic in­vestors are a whole new lev­el of scruti­ny. Of course your de­vel­op­ment pro­grams need to be well po­si­tioned, and of course your CMO needs to be cred­i­ble and yes your CFO needs to be ex­pe­ri­enced – but in ad­di­tion to all that YOU as CEO need to be rock sol­id. Pub­lic in­vestors will push you, test you, dili­gence the heck out of you and will on­ly in­vest if they can look you in the eye and see con­vic­tion. Tell them why you be­lieve in the com­pa­ny and show them how you will ex­e­cute. Bot­tom line: IPOs are a very pub­lic ref­er­en­dum about the CEO of a biotech com­pa­ny. Wel­come to the big leagues.


Hamza Suria is the CEO of Anap­tys­Bio, a San Diego-based de­vel­op­er of ther­a­peu­tic an­ti­bod­ies. Biotech Voic­es is a con­tributed col­umn from se­lect End­points News read­ers. Con­tact the pub­lish­er, Ar­salan Arif, for more de­tails.

Hal Barron, GSK

Break­ing the death spi­ral: Hal Bar­ron talks about trans­form­ing the mori­bund R&D cul­ture at GSK in a crit­i­cal year for the late-stage pipeline

Just ahead of GlaxoSmithKline’s Q2 update on Wednesday, science chief Hal Barron is making the rounds to talk up the pharma giant’s late-stage strategy as the top execs continue to woo back a deeply skeptical investor group while pushing through a whole new R&D culture.

And that’s not easy, Barron is quick to note. He told the Financial Times:

I think that culture, to some extent, is as hard, in fact even harder, than doing the science.

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UP­DAT­ED: Stay tuned: Bio­gen’s num­bers are great — it’s their wor­ri­some fu­ture that leaves an­a­lysts skit­tish

Biogen came out with an upbeat assessment of their Q2 numbers today, discounting the arrival of a key rival for its blockbuster Spinraza franchise. But the top execs remain grimly determined to not say much anything new about the sore points that have dragged down its stock, including the future of its big investment in Alzheimer’s or how it plans to invest the considerable cash that the big biotech continues to reap.

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Why wait? Cel­gene re­struc­tures a big Jounce pact — ze­ro­ing in on new I/O path­way with $530M deal and bump­ing ICOS

Celgene’s business team isn’t waiting for the big merger with Bristol-Myers Squibb to go through before syncing its strategy with the new mother ship.

Tuesday evening the big biotech unveiled a $530 million deal — $50 million in upfront cash — to amend their alliance with Jounce Therapeutics $JNCE to gain worldwide rights to JTX-8064, an antibody that targets the LILRB2 receptor on macrophages. Their old, $2.6 billion deal is being scrapped, leaving Jounce with a pipeline that includes the lead drug, the ICOS-targeting vopratelimab.

PACT Phar­ma says it's per­fect­ed the tech to se­lect neoanti­gens for per­son­al­ized ther­a­py — now on­to the clin­ic

At PACT Pharma, the lofty goal to unleash a “tsunami” of T cells personalized for each patient has hinged on the ability to correctly identify the neoantigens that form something of a fingerprint for each tumor, and extract the small group of T cells primed to attack the cancer. It still has a long way to go testing a treatment in humans, but the biotech says it has nailed that highly technical piece of the process.

UP­DAT­ED: My­ovan­t's uter­ine fi­broid drug looks com­pet­i­tive in PhI­II — but can they van­quish mighty Ab­b­Vie?

Vivek Ramaswamy’s Myovant $MYOV has closely matched its positive first round of Phase III data for their uterine fibroid drug relugolix, setting up a head-to-head rivalry with pharma giant AbbVie as the little biotech steers to the market with a planned filing in Q4.

Here’s how Myovant plans to prevail over the AbbVie $ABBV empire.

In the study, 71.2% of women receiving once-daily relugolix combination therapy achieved the clinical response they were looking for, compared to only 14.7% in the control arm. The data comfortably reflected the same outcomes in the first Phase III — 73.4% of women receiving once-daily oral relugolix combination therapy achieved the responder criteria compared with 18.9% of women receiving placebo — which will reassure regulators that they are getting the carefully randomized data that qualifies for the FDA’s gold standard for success.

Lit­tle Mar­i­nus sees its shares eclipsed as the Sage ri­val fails to com­pare on PPD in PhII

The executive team at Sage $SAGE have skirted another potential pitfall on its way to racking up a big future for its depression drug Zulresso.

Little Marinus Pharmaceuticals $MRNS had sought to challenge the Sage drug with an IV formulation — followed by an oral version — of ganaxolone for postpartum depression. But researchers say their Phase II study failed to positively differentiate itself from a placebo at 28 days — leaving them to hold up “clinically meaningful” data within the first day of administration compared to the control arm.

Roche cuts loose Tam­i­flu OTC rights, hand­ing Sanofi the keys as the phar­ma gi­ant dou­bles down on Xofluza

Roche set out to make a better flu medicine than Tamiflu as that franchise was headed to a generic showdown. Now they’ll see just how well Xofluza stacks up against the mainstay drug after handing off over-the-counter rights in the US to Sanofi.

Sanofi $SNY says it will now step in to negotiate a deal with the FDA to steer Tamiflu into the OTC market, a role that could well involve new studies to ease passage of the drug out of doctor’s hands and into the consumer end of the market. And the French pharma giant will have first dibs over “selected” OTC markets around the world as they push ahead.

Aca­dia is mak­ing the best of it, but their lat­est PhI­II Nu­plazid study is a bust

Acadia’s late-stage program to widen the commercial prospects for Nuplazid has hit a wall. The biotech reported that their Phase III ENHANCE trial flat failed. And while they $ACAD did their best to cherry pick positive data wherever they can be found, this is a clear setback for the biotech.

With close to 400 patients enrolled, researchers said the drug flunked the primary endpoint as an adjunctive therapy for patients with an inadequate response to antipsychotic therapy. The p-value was an ugly 0.0940 on the Positive and Negative Syndrome Scale, which the company called out as a positive trend.

Their shares slid 12% on the news, good for a $426 million hit on a $3.7 billion market cap at close.

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Some Big Phar­mas stepped up their game on da­ta trans­paren­cy — but which flunked the test?

The nonprofit Bioethics International has come out with their latest scorecard on data transparency among the big biopharmas in the industry — flagging a few standouts while spotlighting some laggards who are continuing to underperform.

Now in its third year, the nonprofit created a new set of standards with Yale School of Medicine and Stanford Law School to evaluate the track record on trial registration, results reporting, publication and data-sharing practice.