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Public Company Edition: The gene therapy firm’s IPO priced at $18 and ended its first day up 23.3% at $22.20 but fell to $21.50 when stocks recovered on 2 March. Also, RedHill raised $115m for product launches and Movantik purchase, and Avadel raised $65m to compete with Jazz.
The last week of February wasn’t an ideal time for any company to launch an initial public offering, with US stock market indices trading lower on coronavirus fears, but Passage Bio Inc. took a chance with both new and existing investors to fund clinical development of its gene therapy candidates for rare monogenic central nervous system (CNS) diseases.
CEO Bruce Goldsmith told Scrip that Passage Bio briefly considered postponing its IPO until the impacts of business interruptions related to the coronavirus were better understood, but ultimately the offering’s investors and the company’s bankers, lawyers, management and board of directors determined there was enough support to move forward.
In the end, the decision to go public paid off, since Passage Bio grossed $216m on 27 February from the sale of 12m shares at $18 each – the top of a $16-$18 proposed range. The IPO grew in the weeks before its launch, starting with a proposed offering of 7.4m shares that was increased to 10m shares before the ultimate sale of 12m shares.
Passage Bio’s stock closed its first day of trading up 23.3% at $22.20 on 28 February – a day when the Dow Jones Industrial Average closed down 1.4% and the Nasdaq gained just 0.01 points. Even though the company closed down 3.2% at $21.50 on 2 March as US stock market indices staged an impressive recovery – the Dow Jones rose 5.1% and the Nasdaq gained 4.5% – the stock still traded 19.4% above its IPO value.
“We're really pleased with the IPO, but the real work continues now in terms of just building our operations, clinical development, etc. to bring these drugs forward,” Goldsmith said.
Passage Bio IPO, Biotechs Resist Coronavirus Stock Impact
The Nasdaq Biotechnology Index (NBI) was down only 7.2% during the last week of February versus a 13.3% drop for the Dow Jones and 7.8% decline for the Nasdaq; the NBI gained 4.6% on 2 March.
Biopharmaceutical companies with recently launched IPOs continued to do well even during a tough week for stocks at the end of February, with Revolution Medicines Inc. and Black Diamond Therapeutics Inc. closing for the month at $31.27 and $26.99, respectively, versus their IPO prices of $17 and $19. They rose again to $32.84 and $30.19 on 2 March.
Passage Bio doesn’t have a business interest in the coronavirus drug development game, however, since its focus is gene therapies for rare monogenic CNS diseases from the labs of James Wilson at the University of Pennsylvania, including UPenn’s Gene Therapy Program and Orphan Disease Center.
The company has licensed six of 12 possible programs under its agreement with the university and plans to take the first three into the clinic during the second half of 2020 and first half of 2021. UPenn is responsible for all preclinical development, including investigational new drug (IND) application-enabling studies, and Passage Bio is responsible for clinical development and commercialization.
An IND application will be filed with the US Food and Drug Administration for Passage Bio’s first gene therapy in the treatment of GM1 gangliosidosis during the first half of 2020 so that the company can start its first clinical trial in the second half of this year. INDs will be filed in the second half of 2020 so that clinical studies can start during the first half of 2021 for programs in frontotemporal dementia and Krabbe disease.
“Independent of this financing, we had cash on hand at the end of the year of $159m and the plan was to grow from year-end 2019 of about 20 people to year-end 2020 of approximately 80 people, so we were going to do a lot of hiring; that was always the plan,” Goldsmith said. “What this influx of capital will allow us to do is to continue to grow the company and to move all of the programs forward as planned through the first quarter of 2023.”
The other three programs that Passage Bio has licensed are for metachromatic leukodystrophy (MLD), a genetic variant of amyotrophic lateral sclerosis (ALS) and Charcot-Marie-Tooth type 2a, which are in various stages of discovery and candidate selection. The company has an option to license gene therapies for up to six more CNS diseases from UPenn.
“We have up to 12 programs that we can option from the Gene Therapy Program and it’s not exclusive, so we can certainly look outside of the University of Pennsylvania, technically, and certainly we'd consider that,” Goldsmith said.
He noted that the quality of the UPenn programs is so strong, however, that there is “a high hurdle to license other programs in, but it's certainly an option that we think about.”
Public Company Financings: RedHill’s Royalty Deal
Concurrent with RedHill Biopharma Ltd.’s announcement that it would pay $52.5m up front to acquire global rights from AstraZeneca PLC to the opioid-induced constipation drug Movantik (naloxegol) the Israeli company announced that it entered into a royalty-backed term loan agreement with HealthCare Royalty Partners (HCR) for up to $115m in financing.
Tel Aviv-based RedHill said it will get $30m initially to support its ongoing launch of Aemcolo (rifamycin) for travelers’ diarrhea and the planned first quarter 2020 launch of the Helicobacter pylori therapy Talicia (omeprazole magnesium/amoxicillin/rifabutin). Another $50m will be drawn down under the term loan agreement to fund the Movantik acquisition. The final $35m is available in two tranches depending on satisfaction of certain conditions. In exchange, HCR will receive low single-digit royalties on RedHill product sales and interest payments.
In other public company financings and strategic updates:
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