Finance Watch: Biopharma IPOs Defy Broader Stock Performance Trends

Public Company Edition: With returns for newly public biopharma companies rising, seven more jumped in line to go public in the US between the beginning of February and early March, while two drug developers launched IPOs in the EU. Meanwhile, already public companies keep raising gobs of cash.

Since already-good returns for January's initial public offerings are rising, seven additional biopharmaceutical companies indicated their intention to launch IPOs in the US between early February and early March.

January's biopharma IPOs delivered an average return of 52.8% by Feb. 1 and the return for those seven companies grew to 63.7% as of March 1, besting by a wide margin relatively slim increases for broader US stock indices during a recent period of volatility. Only two therapeutics firms went public in February and one, so far, in March as investors keep an eye on the market's peaks and valley, but with several recent biopharma offerings providing high double-digit returns, more candidates are willing to climb the IPO mountain.

The Nasdaq Biotechnology Index (NBI) is performing relatively well compared with the Dow Jones Industrial Average and Nasdaq, which peaked on Jan. 26 – up 8% and 8.7%, respectively, from the beginning of 2018. But by March 9 the Dow was up only 2.1% while the Nasdaq regained momentum to rise 9.5% for the year, while the NBI peaked with an 11% jump from the start of 2018 on Jan. 29 and is now up 7.2% year-to-date.

Dermapharm's IPO In Germany

Dermapharm, the German manufacturer and marketer of branded generics, and the country's fourth-largest parallel importer of pharmaceuticals, has completed an IPO of approximately 25% of its privately held shares, and listed on the Frankfurt Stock Exchange on Feb. 9.

The offering raised gross proceeds of around €377m (about $464m), of which around €108m is attributable to the company, and these funds are to be used to support Dermapharm's international expansion, the in-house development of new products, and company acquisitions.

The company also markets cosmetics, food supplements, dietary products and medical devices. It bought the German pharmaceuticals manufacturer and distributor Trommsdorff in January, and the over-the-counter company Strathmann in December.

Dermapharm was founded in 1991 by Wilhelm Beier, the current chairman of its supervisory board, and the now 75% family-owned company has headquarters in Grunwald, near Munich, and a manufacturing facility in Brehna, near Leipzig. Most of Dermapharm's 2016 revenues of €444.5m came from its German business, with some revenue from Austria and Switzerland, and the company recorded earnings before interest, taxes, depreciation and amortization (EBITDA) of €102.7m. – John Davis

Investors in Europe and Asia are growing more enthusiastic about biopharma stocks as well. Two therapeutics companies went public in Europe in February and early March – Dermapharm AG of Frankfurt, Germany (see sidebar) and Acacia Pharma Ltd. in Cambridge, UK, which raised €40m from the sale of 11.1m shares at €3.60 on March 2. Acacia is developing specialty pharmaceuticals for the US hospital market. (Also see "Acacia's Euronext Listing To Help Target Unmet US PONV Market" - Scrip, 5 Feb, 2018.)

In Asia, the Korean and Chinese IPO markets also are heating up with the possibility of multiple first-time offerings by drug developers. (Also see "Incentives, Novel Tech Seen Driving Multiple Korean IPOs In 2018" - Scrip, 7 Feb, 2018.) and (Also see "Closer To Home: Hong Kong Takes On Nasdaq For China Biotech IPOs" - Scrip, 6 Feb, 2018.)

US IPO Market Most Active

Still, the US has the most active IPO market with seven biopharma offerings in January, two in February and one this month with an average return of 52.8% as of March 9 (see table below). (Also see "IPO Update: Seven In January As Big Returns, Solid's Slip-Up Contribute To Bubble Concerns" - Scrip, 2 Feb, 2018.) Those returns and the NBI's relatively good performance so far this year are why more therapeutics developers are making preparations to go public even when stocks in general are experiencing volatility.

In the first of February's US IPOs, Evolus Inc. offered 5m shares at $12 each on Feb. 7 for $60m in gross proceeds. The Irvine, Calif.-based company said that it closed the IPO on Feb. 12, but its underwriters still had a 30-day option to sell up to 750,000 shares to meet additional demand.

Evolus is developing a competitor to Allergan PLC's blockbuster wrinkle-reducer and migraine-reliever Botox (onabotulinumtoxinA) called prabotulinumtoxinA (DWP-450), which is under US FDA review with a May 15 user fee date for the treatment of glabellar lines (wrinkles between the eyes). (Also see "Allergan Relying On 'Six Stars' And Other R&D Programs To Blunt Restasis Blow" - Scrip, 19 Jan, 2018.)

Also last month, the German firm Biofrontera AG launched its offering on Feb. 14 and closed the IPO with the sale of 1.3m American Depository Shares (ADSs) at $9.88 each for $12.9m in gross proceeds. The money from this and a concurrent offering in Frankfurt will be used to expand the company's US sales and marketing organization as well as to fund additional clinical trials and seek further approvals for Ameluz (5-aminolev-ulinic acid), among other expenses. Updated Phase III results for Ameluz in actinic keratosis were reported in January, showing lower recurrence rates. 

Finally, Branford, Conn.-based BioXcel Therapeutics Inc. went public at $11 per share, grossing $60m from the sales of 5.5m shares. BioXcel registered its IPO intentions with the US Securities and Exchange Commission (SEC) on Feb. 12 to raise up to $69m in an IPO and proposed offering terms of 5m shares at $11 to $13 each on Feb. 27, which at the high end would have grossed up to $65m before the sale of overallotments. BioXcel is using artificial intelligence to develop drugs in neuroscience and immuno-oncology, and entered into a partnership with Takeda Pharmaceutical Co. Ltd. in 2015. (Also see "Takeda seeks 'big data' analytics for rare disease drug discovery" - Scrip, 10 Apr, 2015.) The company is preparing to begin Phase II proof-of-concept studies for BXCL501 in the treatment of agitation in neurological and psychiatric conditions and for BXCL701, which is intended for the treatment of prostate and pancreatic cancers.

Seven New Potential Offerings

BioXcel was one of the seven biopharma companies that filed paperwork with the SEC in February and early March to declare their plans to go public. The other six include:

• PolyPid Ltd. of Petach Tikva, Israel, is seeking up to $86.25m in a Feb. 8 filing to fund development of locally administered therapies created with its Polymer-Lipid Encapsulation matrix (PLEX) technology, including D-Plex containing the antibiotic doxycycline for the prevention of infections following surgery. (Also see "Antibiotic Pipeline Profile: Targeting Delivery To Infection Site" - Scrip, 7 Jul, 2017.) A Phase I/II clinical trial has been completed and PolyPid is making preparations for a Phase III trial starting late in 2018 or in early 2019. PolyPid filed to raise up to $20m in October 2014 and withdrew the offering in May 2015.
• Arcus Biosciences Inc. in Hayward, Calif., said in a Feb. 16 filing that it intends to raise up to $100m in an IPO and on March 5 the company proposed the sale of 7.1m shares for $13m to $15m, which would gross $106.5m before overallotments at the top of the range. Arcus just closed a $107m Series C venture capital round in November to fund development of its immuno-oncology drugs along and in combination with other agents. (Also see "Finance Watch: A Bountiful November Harvest For Venture-Backed Biopharma" - Scrip, 21 Nov, 2017.)
• Taipei-based Taiwan Liposome Co. Ltd. (TLC) registered its IPO intentions with the SEC on Feb. 16, seeking to raise up to $50m for the development of nanomedicines for pain management, ophthalmology and oncology. (Also see " Video Interview: TLC Delivers Sustained Release And Improved Tissue Targeting " - Scrip, 3 Mar, 2016.)
• UNUM Therapeutics Inc. of Cambridge, Mass., only filed for an IPO on March 2, but already its proposed offering to raise up to $86.25m is controversial. Unum raised a $12m Series A round in 2014 and a $65m Series B in 2015. (Also see "Biotech VC dips in 3Q, but 2014 on track to beat 2013" - Scrip, 26 Oct, 2014.) and (Also see "Venture Funding Deals, July 2015" - Scrip, 9 Jul, 2015.) The company is developing T-cell-boosting immuno-oncology therapies with three candidates currently in early clinical trials. (Also see "Unum Therapeutics Inc." - Scrip, 25 May, 2015.) Where it has run into controversy is that Unum disclosed in its initial IPO filing that the US FDA placed its Phase I ATTCK-20-2 trial for lead candidate ACTR087 in non-Hodgkin lymphoma on hold due to two treatment-related deaths and a death that was unrelated to the therapy. The hold was lifted in February. 
• Bedford, Mass.-based Homology Medicines Inc. filed on March 2 to raise up to $100m in an IPO after closing an $83.5m Series B round on Aug. 1. (Also see "Finance Watch: Canaan Closes New VC Fund; CARB-X Backs More Antibiotics" - Scrip, 2 Aug, 2017.) The company is using its gene-correction platform, which harnesses the DNA-repair process of homologous recombination, to develop treatments for rare genetic diseases. Its lead program to treat phenylketonuria (PKU) will move into the clinic in 2019.
• Autolus Ltd., the London-based T-cell engineering firm that closed an $80m Series C round in September, said on March 5 that it submitted a confidential filing to the SEC to register its intention to launch a US IPO. (Also see "Autolus Raises $80m To Take T-Cell Engineering To The Next Level" - Scrip, 26 Sep, 2017.) Because the F-1 registration statement was submitted confidentially, just how much money the company is seeking is unknown. UK-based parent company Arix Bioscience PLC went public on the London Stock Exchange last year. (Also see "Arix To Nurture Next Generation Biotechs After UK IPO" - Scrip, 3 Feb, 2017.)

2018 Year-To-Date US Biopharma IPO Performance
Company	IPO Price	March 9 Price	Return
Cue Biopharma Inc. (CUE)	$7.50	$16.89	125.2%
Menlo Therapeutics Inc. (MNLO)	$17	$33	94.1%
Eyenovia Inc. (EYEN)	$10	$9.08	-9.2%
resTORbio Inc. (TORC)	$15	$15.90	6%
Solid Biosciences Inc. (SLDB)	$16	$28.19	76.2%
ARMO BioSciences Inc. (ARMO)	$17	$47.80	181.2%
Sol-Gel Technologies Ltd. (SLGL)	$12	$11.12	-7.3%
Evolus Inc. (EOLS)	$12	$12.07	0.6%
Biofrontera AG (BFRA)	$9.88	$15.88	60.7%
BioXcel Therapeutics Inc. (BTAI)	$11	$11	0%
Average Return:			52.8%

Selected Follow-On Offerings

Just as biopharma IPOs have found an audience with investors, already publicly traded drug developers have been able to sell shares in follow-on offerings, offer convertible notes or pursue other options to fund deals, development and commercialization.

Celgene Corp. had the biggest offering since Finance Watch last reported on public company financings in early February. (Also see "Finance Watch: Another Mega-Round As Moderna Bucks Biopharma's IPO Trend" - Scrip, 5 Feb, 2018.) Celgene priced four series of senior unsecured notes with an aggregate principal amount of $4.5bn on Feb. 9 to fund the company's $9bn acquisition of Juno Therapeutics Inc., which closed on March 6. (Also see "Celgene Seeks CAR-T Leadership, Hematology Diversification With Juno Buy" - Scrip, 22 Jan, 2018.)

Other significant public company financings during the past month include:

• Cambridge, Mass.-based SAGE Therapeutics Inc. priced 3.5m shares at $164 each on Feb. 8 and sold all 525,914 shares set aside for overallotments by the time the offering closed later in the month, generating net proceeds of $631.1m. The company posted positive results in November for brexanolone in postpartum depression and in December for SAGE-217 in depression. (Also see "All Smiles At Sage As Phase III Postpartum Depression Data Are Positive" - Scrip, 9 Nov, 2017.) and (Also see "Sage's Oral GABA-A Modulator Shows 'Dramatic' Effect On Depression" - Scrip, 7 Dec, 2017.)
• Amicus Therapeutics Inc. grossed $300m from the sale of 19.4m shares at $15.50 each in an offering that closed on Feb. 21, though the underwriters still had time on a 30-day option to sell up to 2.9m additional shares. The Cranbury, NJ-based company will use the net proceeds to build US commercial infrastructure for the Fabry disease drug migalastat, which has an Aug. 13 FDA review deadline. The financing also will support other development programs and corporate expenses. (Also see "FDA Reversal Gives Amicus Renewed Hope For US Oral Fabry Launch" - Scrip, 11 Jul, 2017.)
• Food allergy-focused Aimmune Therapeutics Inc. closed the sale of 6.3m shares at $32 each on March 2, grossing $202.4m, including overallotments. The Brisbane, Calif.-based company took advantage of investor goodwill after it reported positive Phase III results in February for the peanut allergy preventative therapy AR101. (Also see "Aimmune Accelerates Commercial Planning For Peanut Allergy Drug " - Scrip, 20 Feb, 2018.)
• Berkeley, Calif.-based Dynavax Technologies Corp. said on Feb. 20 that it closed on a $175m term loan with the health care-focused investment firm CRG LP to help fund the commercialization of hepatitis B vaccine Heplisav-B in the US following FDA approval in November and the product's launch in January. (Also see "Heplisav-B Approval Has Dynavax Going It Alone On US Launch In Early 2018" - Scrip, 13 Nov, 2017.) The company, which had $192m in cash at the end of 2017, received $100m from CRG initially and may borrow up to $75m in a second tranche. Dynavax also will use its cash on hand and term loan proceeds to fund Phase II and III studies for the immuno-oncology candidate SD-101.
• Catalyst Biosciences Inc. in South San Francisco closed an offering of 3.8m shares at $34 each on Feb. 15 for gross proceeds of $115m, which will fund the ongoing development of its novel hemophilia therapies. The company provided a positive update from its Phase II study of CB 2679d in hemophilia B in mid-February. (Also see "Pipeline Watch: Phase III Progress With Avelumab, Ixekizumab And Eravacycline" - Scrip, 16 Feb, 2018.)
• Alpharetta, Ga.-based Clearside Biomedical Inc., which went public in 2016 at $7 per share, priced a follow-on offering of 6.5m shares at $13 each to gross $85m on March 7. (Also see "US IPOs In Review: Relatively Muted Market In 2016 To Continue In 2017" - Scrip, 30 Dec, 2016.) The company reported positive Phase III results in macular edema associated with non-infectious uveitis on March 5 for CLS-TA, Clearside's proprietary suspension of triamcinolone acetonide for administration to the back of the eye via the suprachoroidal space.