Did Mod­er­na break the biotech IPO mar­ket?

2018 end­ed re­plete with a record-break­ing round of FDA ap­provals and IPO cash rich­es for the year. But that ra­pa­cious en­thu­si­asm soured as De­cem­ber rav­aged stocks across the board, in­clud­ing some ag­gres­sive­ly val­ued new­ly-pub­lic com­pa­nies that al­so end­ed up as col­lat­er­al dam­age, as the cor­rec­tion at the end of the year blurred lines in­to a bear mar­ket.

While the sell-side came out gun­ning with am­bi­tious stock price pro­jec­tions ear­ly Wednes­day, one promi­nent set of an­a­lysts sees mar­ket sen­ti­ment tip­ping to­ward an an­gry back­lash that could have a pro­found im­pact on an in­dus­try that’s en­joyed bil­lions in new pub­lic in­vest­ments.

“If there was any­thing good about De­cem­ber it was on­ly that it end­ed,” Cowen an­a­lysts wrote in a note eval­u­at­ing bio­phar­ma sen­ti­ment on Wednes­day. “Stock per­for­mance wasn’t just poor, but hor­ri­ble by his­tor­i­cal pro­por­tions. The eq­ui­ty in­dices had one of the the worst De­cem­bers of the past cen­tu­ry with both the S&P 500 and DJIA eras­ing not just 2018’s gains, but a por­tion of those from 2017. Biotech fared no bet­ter. The NBI was down 11.2% in De­cem­ber, clos­ing 2018 down 9.3%. Sim­i­lar­ly the XBI (-12.1% in De­cem­ber, -15.5% in 2018) has not just end­ed 2018 down, but has giv­en back a large pro­por­tion of the per­for­mance since the Q1:16 lows. Fol­low­ing the worst per­for­mance for stocks on a Christ­mas Eve ever, the on­ly mer­cy came via a ~5% re­bound on the day af­ter Christ­mas. Oth­er­wise the per­for­mance would have been that much worse.”

IPOs raked in record sums in 2018 helped along by uni­corn list­ings such as Mod­er­na, Al­lo­gene and Ru­bius. Per­haps the most elec­tri­fy­ing of all pub­lic list­ings last year was that of Mod­er­na $MR­NA, a uni­corn biotech that pulled off the biggest IPO in ear­ly De­cem­ber with a $604 mil­lion boun­ty that as­signed it a mar­ket cap of about $7.5 bil­lion af­ter sell­ing an up­sized 26.2 mil­lion shares at $23 each — the mid-point on its range. The stock, though, soon showed signs of a strug­gle on its first day of trad­ing, end­ing the day down 20% and evap­o­rat­ing some $1.5 bil­lion from its mar­ket val­ue. With a steep drop in Mod­er­na’s trad­ing price in its first day out, Wall Street was show­ing signs of cau­tion.

That re­luc­tance was well timed, as the end of the year proved to be a blood­bath.

“In­vestors are shell shocked by the de­pre­ci­a­tion that was so quick, so dra­mat­ic, and so close to the end of the year. A hand­ful of funds have been closed, and oth­ers have re­struc­tured, mak­ing all less se­cure in their jobs with a fair num­ber head­ing to their hol­i­day va­ca­tions con­tem­plat­ing changes in ca­reers. Sen­ti­ment is worse than we can re­mem­ber over the last five years, and in fact many in­vestors have de­vel­oped a bear mar­ket mind­set,” Cowen an­a­lysts wrote.

In the bio­phar­ma world, per­haps Mod­er­na is the straw that broke the camel’s back. The stock closed at $15.27 on Dec. 31 and a mar­ket cap of about $5 bil­lion. On Wednes­day, a slew of ini­ti­a­tions on the mR­NA com­pa­ny sur­faced from the com­pa­ny’s own un­der­writ­ers:

  • Buy at Gold­man Sachs, PT $25
  • Over­weight at JP Mor­gan, PT $22
  • Over­weight at Piper, PT $24
  • Over­weight at Mor­gan Stan­ley, PT $29
  • Out­per­form at Op­pen­heimer, PT $27
  • Buy at Need­ham, PT $28

For Cowen, a no­table ex­cep­tion from Mod­er­na’s list of un­der­writ­ers, IPO sen­ti­ment in 2019 will be un­der­scored by re­straint and vig­i­lance.

“Fol­low­ing some no­table IPOs that were per­ceived to be ag­gres­sive­ly val­ued, and that quick­ly broke the deal price, the mood to­ward IPOs has sunk be­low dis­in­ter­est to­ward anger. The win­dow may not have closed com­plete­ly, but in­vestors will be very choosy over the next sev­er­al months, se­lec­tive­ly sup­port­ing com­pa­nies with strong fun­da­men­tals, pedi­greed man­age­ment, and at­trac­tive val­u­a­tions. Nonethe­less, there re­mains no short­age of pri­vate com­pa­nies hop­ing to IPO dur­ing 2019,” not­ed the an­a­lyst team.


Im­age: SHUT­TER­STOCK

2023 Spot­light on the Fu­ture of Drug De­vel­op­ment for Small and Mid-Sized Biotechs

In the context of today’s global economic environment, there is an increasing need to work smarter, faster and leaner across all facets of the life sciences industry.  This is particularly true for small and mid-sized biotech companies, many of which are facing declining valuations and competing for increasingly limited funding to propel their science forward.  It is important to recognize that within this framework, many of these smaller companies already find themselves resource-challenged to design and manage clinical studies themselves because they don’t have large teams or in-house experts in navigating the various aspects of the drug development journey. This can be particularly challenging for the most complex and difficult to treat diseases where no previous pathway exists and patients are urgently awaiting breakthroughs.

Dipal Doshi, Entrada Therapeutics CEO

Ver­tex just found the next big ‘trans­for­ma­tive’ thing for the pipeline — at a biotech just down the street

Back in the summer of 2019, when I was covering Vertex’s executive chairman Jeff Leiden’s plans for the pipeline, I picked up on a distinct focus on myotonic dystrophy Type I, or DM1 — one of what Leiden called “two diseases (with DMD) we’re interested in and we continue to look for those assets.”

Today, Leiden’s successor at the helm of Vertex, CEO Reshma Kewalramani, is plunking down $250 million in cash to go the extra mile on DM1. The lion’s share of that is for the upfront, with a small reserve for equity in a deal that lines Vertex up with a neighbor in Seaport that has been rather quietly going at both of Vertex’s early disease targets with preclinical assets.

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Christian Itin, Autolus CEO (UKBIO19)

Au­to­lus tips its hand, bags $220M as CAR-T show­down with Gilead looms

The first batch of pivotal data on Autolus Therapeutics’ CAR-T is in, and execs are ready to plot a path to market.

With an overall remission rate of 70% at the interim analysis featuring 50 patients, the results set the stage for a BLA filing by the end of 2023, said CEO Christian Itin.

Perhaps more importantly — given that Autolus’ drug, obe-cel, is going after an indication that Gilead’s Tecartus is already approved for — the biotech highlighted “encouraging safety data” in the trial, with a low percentage of patients experiencing severe immune responses.

WIB22: Am­ber Salz­man had few op­tions when her son was di­ag­nosed with a rare ge­net­ic dis­ease. So she cre­at­ed a bet­ter one

This profile is part of Endpoints News’ 2022 special report about Women in Biopharma R&D. You can read the full report here.

Amber Salzman’s life changed on a cold, damp day in Paris over tiny plastic cups of lukewarm tea.

She was meeting with Patrick Aubourg, a French neurologist studying adrenoleukodystrophy, or ALD, a rare genetic condition that causes rapid neurological decline in young boys. It’s a sinister disease that often leads to disability or death within just a few years. Salzman’s nephew was diagnosed at just 6 or 7 years old, and died at the age of 12.

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Ahead of ad­comm, FDA rais­es un­cer­tain­ties on ben­e­fit-risk pro­file of Cy­to­ki­net­ic­s' po­ten­tial heart drug

The FDA’s Cardiovascular and Renal Drugs Advisory Committee will meet next Tuesday to discuss whether Cytokinetics’ potential heart drug can safely reduce the risk of cardiovascular death and heart failure in patients with symptomatic chronic heart failure with reduced ejection fraction.

The drug, known as omecamtiv mecarbil and in development for more than 15 years, has seen mixed results, with a first Phase III readout from November 2020 hitting the primary endpoint of reducing the odds of hospitalization or other urgent care for heart failure by 8%. But it also missed a key secondary endpoint analysts had pegged as key to breaking into the market.

Ab­b­Vie slapped with age dis­crim­i­na­tion law­suit, fol­low­ing oth­er phar­mas

Add AbbVie to the list of pharma companies currently facing age discrimination allegations.

Pennsylvania resident Thomas Hesch filed suit against AbbVie on Wednesday, accusing the company of passing him over for promotions in favor of younger candidates.

Despite 30 years of pharma experience, “Hesch has consistently seen younger, less qualified employees promoted over him,” the complaint states.

Nashville-based CD­MO nets a $65M Se­ries B to ex­pand fa­cil­i­ty and ca­pa­bil­i­ties

Another $65 million is music to the ears of the team at August Bioservices, a contract manufacturer in Nashville.

The company announced the Series B round last week, which will fund equipment in a new building expected to open in 2023, according to CEO Jenn Adams. It was led by Oak HC/FT, the same firm that led August’s Series A round in July 2020.

August Bioservices, a producer of materials such as prefilled syringes, IV bags and vials, was formed back in 2020 after the acquisition of PMI BioPharma Solutions, also based in Nashville. Adams said the goal was to build a business that could “address the scarcity of supply relative to sterile injectable manufacturing based in the US” and provide a broad range of manufacturing services.

Rami Elghandour, Arcellx CEO

Up­dat­ed: Gilead, Ar­cel­lx team up on an­ti-BC­MA CAR-T as biotech touts a 100% re­sponse rate at #ASH22

Gilead and Kite are plunking down big cash to get into the anti-BCMA CAR-T game.

The pair will shell out $225 million in cash upfront and $100 million in equity to Arcellx, Kite announced Friday morning, to develop the biotech’s lead CAR-T program together. Kite will handle commercialization and co-development with Arcellx, and profits in the US will be split 50-50.

Concurrent with the deal, Arcellx revealed its latest cut of data for the program known as CART-ddBCMA, ahead of a full presentation at this weekend’s ASH conference — a 100% response rate among patients getting the therapy. Investors jumped at the dual announcements, sending Arcellx shares $ACLX up more than 25% in Friday’s morning session.

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WIB22: Lead­ing NK cell re­searcher re­flects on roots in Iran, the UK and Texas

This profile is part of Endpoints News’ 2022 special report about Women in Biopharma R&D. You can read the full report here.

In a small but widely-cited 11-person study published in NEJM in 2020, seven patients saw signs of their cancer completely go away after getting a new therapy made from natural killer cells. The study was one of the earliest to provide clinical proof that the experimental treatment method had promise.

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