Canadian biopharma Zymeworks files for $75 million IPO; name may sound funky but gameplan dead serious

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Biopharmaceutical company Zymeworks Inc. (Vancouver BC) on Monday (April 3, 2107) said it has filed with the US Securities and Exchange Commission for an initial public offering. The company, which develops cancer treatments, said it intends to list on the New York Stock Exchange and the Toronto Stock Exchange under the ticker symbol “ZYME.” Cannacord Genuity is acting as lead manager; Citigroup, Barclays and Wells Fargo are joint book runners. Cormark Securities is co-manager.

Zymeworks has been high-fiving its way through a se­ries of part­ner­ships and ex­pan­sion pro­jects fo­cused on its bis­pe­cific an­ti­bod­ies and armed antibody-drug conjugates (ADCs)–two plat­forms Zymeworks will now de­pend upon to raise at least $75 mil­lion in an IPO.

The company has built its rep­u­ta­tion around a lineup of big bio­pharma deals, Endpoints notes. In ad­di­tion to early backers Eli Lilly and Cel­gene, Glax­o­SmithK­line and Merck also have jumped on board the biotech’s pri­mary Azy­met­ric drug de­vel­op­ment plat­form. Dai­ichi Sankyo is the latest company to join in. And Zymeworks re­cently added a 10,000-square-foot lab in its Van­cou­ver base.

Its lead pro­gram–ZW25–(now in the clinical stage) uses a bis­pe­cific technology “to ad­dress pa­tient pop­u­la­tions with all levels of HER2 ex­pres­sion,” reads the F-1 (Registration Statement), “includ­ing those with low to in­ter­me­di­ate HER2-ex­press­ing tumors, who are oth­er­wise lim­ited to chemother­apy or hor­mone therapy.”

Zymeworks now joins a short list of com­pa­nies that are try­ing to make a leap into the pub­lic mar­ket. While CEO Ali Tehrani wanted to pick his time, the biotech IPO mar­ket has been shaky in early 2017, with some suc­cesses and some fail­ures. “We’re a long way from the boom days of 2014,” Tehrani notes.

This particular biotech, though, has a long list of back­ers. The co-lead in­vestors in the last round were BDC Cap­i­tal and Lu­mira Cap­i­tal, first-timers, with ex­ist­ing in­vestors CTI Life Sci­ences Fund and the Fonds de sol­i­darité FTQ jump­ing in. Other new in­vestors in the lat­est fi­nanc­ing in­cluded Per­cep­tive Ad­vi­sors, Teralys Cap­i­tal, North­leaf Ven­ture Cat­a­lyst Fund, Brace Pharma Cap­i­tal and Mer­lin Nexus.

Steve’s Take:

It’s been about a decade, but over the next few weeks investors, both in the US and Canada, will decide whether to support a Vancouver-based biopharmaceutical company. Financial Post notes that the last Canadian biopharmaceutical IPO by a Canadian company onto a Canadian exchange was Winnipeg-based Imris Inc. which raised $40 million in a 2007 offering.

Now, Zymeworks filed documents with Canadian and US regulatory authorities for an initial public offering. Plans call for the shares to be listed on the NYSE and on the TSX. According to the registration statement filed with the Securities & Exchange Commission (the full document runs to 302 pages; three less than the Canadian prospectus) the company plans to raise a maximum of US$75 million.

From all appearances it would seem the bulk of the shares will be sold to US investors. For starters, the company qualifies as an “emerging growth company” under the Jumpstart Our Business Startups Act, or the JOBS Act, that was signed by President Obama in 2012. That status brings certain benefits including exemptions from various requirements that are normally applicable to public companies in the United States.

A couple of other reasons are in play, says Financial Post: the shares are set to be denominated in US dollars and the underwriters are either US firms or the US firms of Canadian investment dealers. Three US firms, Citigroup, Barclays and Wells Fargo Securities, carry the title of joint book-running managers, while Canaccord Genuity is a lead manager and Cormark Securities (USA) Ltd. is a co-manager.

Zymeworks defines itself as “a clinical-stage biopharmaceutical company dedicated to the discovery, development and commercialization of next-generation multifunctional biotherapeutics, initially focused on the treatment of cancer.” The company, which has been around since 2003, operates under the trademark, “Building Better Biologics.” And it generates revenue: $11 million in the year ended Dec. 31 2016–up from $9.66 million the previous year and $1.67 million total before that.

Over those recent three years Zymeworks has operated with larger losses. But it has been able to attract considerable support from outside shareholders, the largest of which is Eli Lily, which has a 17.5% stake. Montreal based CTI Life Sciences Fund is the next largest with a 14.6% stake, while investment funds owned by Ian Ihanatowycz (the founder of Acuity Investment Management which was later sold to AGF Management) is listed as the third largest shareholder with an 8.5% stake. US based Celgene Alpine Investment Co. with a 6.1% stake, is the only other shareholder with a stake of more than 5%. As a group, the executive officers and directors have a 14.7% interest.

None of the current shareholders are planning to sell any of their holdings into the IPO. Instead all the proceeds will flow to the company, which plans to use a portion to fund the clinical development expenses for two of its “product candidates”–ZW25 and ZW33. The former is in an “ongoing adaptive Phase 1 clinical trial,” while the latter is set for a “planned Phase 1 clinical trial.”

Steve's Take: @Zymeworksinc has all the earmarks of a successful #IPO Click To Tweet

This company has all the earmarks of both a successful IPO pop and clinical/commercial future going forward. So if you ever wanted to get a piece of an IPO in this roll-the-dice investment space, this might be it. Easier said than done, depending upon your status with whomever is investing your money. But the clock is now ticking. Enough said.

Steve Walker has no position in any stocks mentioned. MedContent Inc. has no position in any stocks mentioned. MondayMorning.com has a disclosure policy.