New norm? Three biotechs pencil in $100M IPOs
Three biotechs have tagged onto an impressive streak of IPOs this year, penciling in $100 million each for their public debuts.
The S-1 from 4D Molecular Therapeutics, Cabaletta Bio and Phathom Pharma — all filed Monday — represent a spread in development stages, technologies as well as therapeutic focus. Roche-partnered 4D Molecular Therapeutics is looking to bring its gene therapy pipeline to the clinic; Cabaletta is putting a twist on the CAR-T cell therapy approach to tackle autoimmune diseases and raising cash for a Phase I trial; while Phathom Pharma has some late-stage programs for a GI asset spun out from Takeda to run.
It also invites the question of whether biotechs are rushing for those big valuations before the wide-open biotech window begins to narrow.
The prospects of an election year might have also spurred execs to act quickly, according to Jordan Saxe, Nasdaq’s head of healthcare listings.
“If you’re looking at going this year or next year, and you have the option of this year, why not,” he told Endpoints News in a recent interview.
Below we unpack the details on each of the three IPOs — likely the beginning of more to come in Q4 as Saxe estimates about a dozen more applications.
4D Molecular Therapeutics
When they founded the Emeryville, CA-based biotech in 2013, David Kirn, David Schaffer and Theresa Janke set out to find better AAV — the vectors most commonly used to deliver therapeutic transgenes into patients for one-time cures. A research deal with Pfizer in 2016 aimed at cardiac disease helped get the operations off the ground and a year later Roche, which had teamed up with 4D Molecular Therapeutics to study rare retinal diseases back in 2015, stepped up their ophthalmology deal, licensing a choroideremia program. Soon after AstraZeneca also inked an alliance on chronic lung disease.
None of the financial details were disclosed at the time; we now learn from the SEC filing that they are all minuscule for the big players. The upfront payments from Pfizer and AstraZeneca are registered at single-digit millions. The deal expansion with Roche did earn the biotech a lot more, raking in $21 million upfront and $30 million for each exercise of options. For the program in choroideremia, or night blindness, milestone payments add up to $86 million.
The IPO proceeds will fund their lead programs for Fabry disease and cystic fibrosis, with a clinical trial planned for the second half of 2020. There are also plans to advance other preclinical therapies covering a range of ailments, and optimize new candidates for Duchenne muscular dystrophy as well as wet age-related macular dystrophy.
Manufacturing is a key component of any gene therapy operation, and execs are eyeing expansion of their in-house capabilities after initiating their first run earlier this year.
All of that has cost $46.2 million. Viking Global, which played a big role in the previous financing totaling $108.6 million, holds 16.0% of the stock, on par with Kirn and Schaffer. Pfizer is in for 11.8% while Repleon claims 7.3%.
The Penn spinout has grabbed two rounds totaling $88 million in the past year, and it’s now seeking more for that big clinical push as well as internal discovery efforts. Helmed by serial entrepreneur Steven Nichtberger, Cabaletta’s big idea is that CAARs — chimeric autoantibody receptors — can identify and eliminate specific, pathogenic B cells while sparing healthy ones.
It marks a different type of T cell engineering than the kind that’s made a splash in cancer, but they’ve got a deep bench of expertise to back it up. Michael Milone, who’s credited for co-inventing Kymriah, is a co-founder alongside Nichtberger and autoimmune/dermatology researcher Aimee Payne.
5AM Ventures, Adage Capital and Baker Bros came on board early, grabbing around 19% of the stock each. The scientific founders retained 6.5%, while Nichtberger’s share is slightly higher at 7.84%. Boxer Capital and Deerfield are also stockholders.
Cabaletta’s first effort will be testing this approach in mucosal pemphigus vulgaris, a rare skin disorder characterized by blisters. The FDA has given the OK on the IND, and they expect to begin a trial in 2020, reserving $30 million from the IPO for that purpose.
While B-cell mediated diseases will remain the focus, Cabaletta also sees potential for their tech in other less obvious targets such as hemophilia. Execs are allocating $45 million for those other programs.
It’s been a hectic week for Phathom Pharmaceuticals, which has largely stayed out of the spotlight since Takeda and Frazier created the venture four months ago. On Friday the Buffalo Grove, IL-based company announced that it’s wooed Terrie Curran from Celgene to become its CEO;
Phathom launched with $90 million in private financing and a $50 million term loan facility. According to the S-1, the lion’s share of the stock — 41.1% — went to Frazier, while Takeda kept 9.1% as well as rights to promote its lead drug in Japan. David Socks, who will step away from the helm once Curran arrives, holds 14.2% just like chairman Tadataka Yamada.
In reality, though, Takeda has an even bigger stake in the company. From a spokesperson who followed up:
In addition to the 9.1% equity ownership, Takeda has additional warrants that bring its total potential ownership to 40%. After factoring in these warrants, the Frazier ownership is 22.5% and David Socks’ ownership is 7.8%.
The plan is to complete Phase III trials for vonoprazan with cash from the IPO, both for erosive esophagitis and H. pylori infection. Already approved by Japanese regulators, the drug belongs to a class that blocks the potassium-binding site of gastric hydrogen potassium ATPase (also known as the proton pump), which is the enzyme largely responsible for acidification of the stomach.
The FDA has designated vonoprazan as a qualified infectious disease product, with all the exclusivity benefits and potential priority review that the QIDP status brings.
On paper Phathom has already burned through $90 million, but the spokesperson clarified that the majority came from an R&D charge that accounts for stocks and warrants given to Takeda. The biotech expects the new infusion to sustain it for another two years.