In putting together a $236M Series D, one biotech spurns Nasdaq and signals the dimming allure of IPOs
As the biotech IPO market continues to flounder after a record pandemic run, the question must be asked: Are companies becoming so IPO-averse that they would rather seek additional private raises than risk going public? For at least one biotech, the answer appears to be yes.
Kallyope closed a $236 million Series D on Tuesday morning about two years after its last funding round, aiming to push forward a slate of clinical programs into further studies. CEO Jay Galeota told Endpoints News that while his company never closed the IPO door following its $112 million Series C in March 2020, the current market played, at least in part, a role in its decision making.
“I think it’s fair to say that we were open to multiple options,” Galeota said. “And at the same time, as the market conditions became less obvious for a public offering, we pivoted to, if you will — or gravitated is probably a better way to describe it — more towards a Series D round to achieve the goals that we have. And that turned out to be the best fit for us.”
Tuesday’s round was co-led by Mubadala Investment Company and The Column Group.
After a period that saw nearly 200 companies go public and raise roughly $25 billion to $30 billion in funds, IPO activity has cooled considerably since last summer. There have only been a handful of S-1s filed so far in 2022, compared to about a dozen by this point last year when the nine-figure raises were commonplace.
On the outside, Kallyope appeared to fit into a similar mold as many of the other biotechs seeking IPOs last year. It had secured a nine-figure crossover with some prominent backers like Casdin Capital and was preparing to enter the clinic, all while the favorable pandemic market conditions were just beginning to emerge.
But Kallyope took a much more deliberate route than its biotech cousins, an ostensibly smart decision in hindsight. The approach has been intentional, Galeota said, though not for the reasons one might think.
“Virtually all of the scientists have been just head down on the bench doing the work. And as a result, we haven’t been talking much about it,” Galeota said. “So we’re at a point now where we’re starting to share what we’ve been doing, because the progress has been so consistent and so exciting.”
That progress has involved moving four therapeutic candidates into clinical trials over the last two years, he said. The biotech has been researching how the unique connections between the brain and the gut can inform drug development for things like diabetes, IBD and celiac disease.
Tuesday’s funding gives Kallyope the ability to continue advancing its initial leads while also helping jumpstart potential clinical efforts on more than 20 other candidates. There’s about three years of cash runway here, Galeota said, allowing the biotech to take each of its clinical compounds into Phase II and file at least one new IND per year.
And if an IPO ever comes calling, the new cash will continue to allow Kallyope to keep its options open.
“This is an enabler that’s very much aligned with where the company is strategically and where it wants to go,” Galeota said of the round. “And it gives us, again, maximum optionality. As the science delivers, there may be opportunities to go even bigger and even faster, which we’re certainly going to be prepared for.”
In addition to Mubadala and The Column Group, Tuesday’s financing also saw returning participation from Alexandria Venture Investments, Bill Gates, Casdin Capital, Euclidean Capital, Illumina Ventures, Lux Capital, Polaris Partners, Two Sigma Ventures and StepStone Group. New investors included DNS Capital, Hartford Healthcare Endowment, Parkwood LLC and Tao Capital.