Weathering the storm: Another biotech braves Covid-19 in upsized IPO
Zentalis isn’t the only biotech to defy expectations as financial markets across the globe roil from the shock of the coronavirus pandemic. Keros Therapeutics has managed to execute an IPO, hitting the top end of its pricing range and selling more shares than originally envisioned, as it shepherds its lead drug into mid-stage development.
The Lexington, Massachusetts-based company’s pipeline of drugs target a family of proteins called transforming growth factor-beta (TGF-β), signaling pathways that regulate blood cell and platelet production, and growth, repair, and maintenance of muscle and bone.
The company’s early-stage lead drug, KER-050, is under development for the treatment of low blood cell counts, or cytopenias, including anemia and thrombocytopenia. Phase II trials are planned in patients with myelodysplastic syndromes (MDS), and those suffering from myelofibrosis. Its second drug, KER-047, is in a Phase I study, and is being developed for use in patients suffering from anemia resulting from elevated levels of a key regulator of iron absorption and recycling, as well as a rare musculoskeletal disorder called FOP. Keros also has a preclinical product being developed for bone loss and PAH.
Keros has raised $96 million, handsomely beating its $80 million target, having offered 6 million shares for $16 a pop. Previously, the biotech had planned to offer 5 million shares in the range of $14 to $16 each. The stock KROS made its debut on Wednesday.
Keros, which raised $56 million in a Series C round last month, is one of a handful of biotechs that got their pre-IPO roadshow “test of the waters” meetings done before the coronavirus outbreak hit, so the only thing left was roadshows, which are easy to execute virtually — indeed roadshows have always had virtual components even before the pandemic, said Jordan Saxe, senior managing director of listing services at Nasdaq, in an interview with Endpoints News.
Saxe has predicted 30 to 35 biotech IPOs this year, raising about $3.5 billion, versus last year’s harvest of $5 billion. However, in comparison to the financial crisis of 2008, it is still a big number.
In recent days, venture capital firms have reported record funding. Between Flagship Pioneering, ARCH Ventures, Deerfield and venBio, nearly $4 billion in funding has been earmarked for the life sciences. In fact, the first quarter of 2020 was the single largest quarter ever for biopharma venture funding in the United States, hitting $5.5 billion in aggregate funding across 171 financing rounds, noted Atlas Venture’s Bruce Booth in a blog post, citing Pitchbook data.
So what is so appealing, so redeeming about biotech? Unlike most other sectors, which are dependent on the sale of products and services, the biopharma industry makes medicines, which we all need come rain or come shine. Apart from timeline delays to clinical trials and regulatory submissions, fundamentals remain strong, and in many areas, the industry is considered key, so lab work is continuing.
“While typical industries are often affected by acute changes in consumer demand (and spikes in unemployment), this isn’t really the case with biopharma: there are plenty of unmet needs of patients where innovative new therapeutics can have a meaningful impact,” Booth said. “Loss-making biopharma is where many of these new drugs are discovered and/or developed today: companies that get funded, and valued, based on data which accrues over years, not weeks and months. That disconnect from conventional economic cycles is one of the reasons why biopharma tends to outperform other sectors during financial recessions.
Additional reporting by Amber Tong.