IPOs keep their hopes alive with new registrations

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Unfazed by record government shutdown, 2019 healthcare IPOs burst out of the gate with 1 pricing and 5 filings.

As expected, no IPOs priced this past week. And due to the government shutdown, no IPOs commenced their roadshows. However, this week, INmune Bio is the first to price its IPO, albeit a best-efforts undertaking.

And a strong contingent of new registrations entered the public pipeline, with 4 initial filings from biotechs Alector (ALEC), Anchiano Therapeutics (ANCN), Cirius (CXTX) and Kaleido (KLDO), and a devicemaker called Brainsway (BRIN) that’s developing a treatment for depression and OCD. Based on recent filings, Renaissance Capital believes the first IPOs of 2019 will be biotechs and Chinese companies, continuing last year’s trend.

While IPOs underperformed in the 4Q18, they started to bounce back last week. The Renaissance IPO Index is up 8.8% since the start of the year, compared to 3.7% for the S&P 500. For the first time in over a month, the Chicago Board Options Exchange (CBOE) Volatility Index, which tracks implied volatility and is considered the Street’s “fear gauge” known as the VIX, fell below 20 to 18. More weeks like this could quickly reinvigorate the IPO rain dance companies frolicked in most of last year.

1) As for healthcare IPOs, let’s take a look at the New Year’s sizzling action, starting with INmune Bio Inc. The La Jolla, CA-based immunotherapy company focused on developing therapies that harness the patient’s innate immune system to fight cancer announced the pricing of its IPO at a price to the public of $8 per share, for gross proceeds of a minimum of $8M and up to $20M.

The company is offering a minimum of 1M shares and up to 2.5M shares to the public. Upon closing of the IPO, INmune’s common stock will be listed on the Nasdaq Capital Market under the ticker symbol “INMB.” The offering will be sold on a best-efforts basis and is expected to close and trade on the Nasdaq by the end of the month. Univest Securities is acting as the lead manager for the IPO, and WallachBeth Capital and WestPark Capital are acting as co-managers.

INmune Bio is a private clinical-stage biotechnology company developing two product platforms, INKmune and INB03, that reengineer the patient’s innate immune system’s response to their cancer. INKmune is a Natural Killer (NK) cell therapeutic that primes the patient’s NK cells to attack developing disease. INB03 inhibits myeloid derived suppressor cells (MDSC), which often cause resistance to immunotherapy, such as anti-PD1 checkpoint inhibitors. INmune Bio’s product platforms target residual disease and utilize a precision medicine approach for treatment of a wide variety of hematologic malignancies and solid tumors.

2) Elsewhere, included in SEC filings for initial public offerings, Alector Inc., a Phase 1 biotech developing therapies for neurodegeneration, registered up to $150M worth of common stock. The South San Francisco, CA-based company was founded in 2013 and booked $22 million in collaboration and grant revenue for the 12 months ended September 30, 2018. It plans to list on the Nasdaq under the symbol “ALEC.” Alector de­vel­ops a basket of drugs de­signed to weaponize the im­mune sys­tem to fight neu­rode­gen­er­a­tive dis­eases, such as Alzheimer’s, where re­cent R&D has fo­cused–largely in vain–on elim­i­nat­ing toxic pro­teins such as amy­loid beta.

Alec­tor has based its pipeline on the sci­en­tific the­ory that neu­rode­gen­er­a­tion and de­men­tia are caused by dys­func­tion of the im­mune sys­tem, and its ar­se­nal of an­ti­bod­ies-in-de­vel­op­ment are de­signed to ei­ther ac­cel­er­ate the im­mune sys­tem or se­lec­tively re­move the brakes that are in place. Morgan Stanley, BofA Merrill Lynch, Cowen and Barclays are the joint bookrunners on the deal. No pricing terms were disclosed.

3) Anchiano Therapeutics Ltd., a Phase 3 biotech developing therapies for early-stage bladder cancer, registered up to $35M worth of common. Insiders intend to purchase up to $17.5M of the IPO (50% of the deal). The Jerusalem, Israel-based company was founded in 2004 and plans to list on the Nasdaq under the symbol “ANCN.” For the nine months ended Sept. 30, expenses climbed to $10.1M from a prior-year $7.5M; R&D was closer to flat at $5.72M vs. a previous $5.22M. The company reports cash and equivalents of $10.9M as of Sept. 30. Anchiano Therapeutics filed confidentially on September 22, 2018. Oppenheimer & Co. is the sole bookrunner on the deal. No pricing terms were disclosed.

4) Next up is Brainsway Ltd., a commercial-stage medical device maker for the treatment of depression & OCD, which registered up to $30M worth of common. Brainsway has been listed on the Tel Aviv Stock Exchange under the ticker “BRIN” since 2007, and closed Monday with a market cap of $97M. In 2011 it launched a $10 million Nasdaq IPO, but later withdrew the offering. The Jerusalem, Israel-based company was founded in 2006 and booked $15M in sales for the 12 months ended September 30, 2018. It plans to list on the Nasdaq under the symbol “BWAY.” Brainsway filed confidentially on November 16, 2018. Cantor Fitzgerald is the sole bookrunner on the deal. No pricing terms were disclosed.

Brainsway bills itself as a commercial-stage medical device company focused on the development and sale of non-invasive neuromodulation products using its proprietary Deep Transcranial Magnetic Stimulation (Deep TMS) technology for the treatment of major depressive disorder (MDD) and obsessive-compulsive disorder (OCD), for which it’s received marketing authorization from the FDA.

Deep TMS uses magnetic pulses to stimulate neurons and consequently modulates the physiological activity of the brain. Its technology can either increase brain activity in neuronal networks which are hypoactive, or alternatively decrease brain activity in neuronal networks which are hyperactive, according to the company.

5) Cirius Therapeutics Inc., which is developing therapies for the treatment of liver and metabolic diseases, registered up to $86M worth of common. Lead candidate is MSDC-0602K, a once-daily orally administered small molecule for nonalcoholic steatohepatitis (NASH) with fibrosis (scarring in the liver). The company says it works by mediating the effects of overnutrition at the cellular level by modulating a protein called mitochondrial pyruvate carrier, or MPC. Final data from a Phase 2b study should be available in H2. The San Diego, CA-based company was founded in 2015 and plans to list on the Nasdaq under the symbol “CSTX.” Citi and Credit Suisse are the joint bookrunners on the deal. No pricing terms were disclosed.

6) Lastly, Kaleido Biosciences Inc., a Phase 2 biotech developing microbiome therapies to treat rare genetic disorders, registered up to $100M worth of common. The Lexington, MA-based company was founded in 2015 and plans to list on the Nasdaq under the symbol “KLDO.” The clinical-stage healthcare firm develops therapies that modulate the metabolic output and profile of the body’s microbiome called Microbiome Metabolic Therapies. Lead candidate is KB195 for the treatment of hyperammonemia (excess ammonia in the blood) in patients with urea cycle disorders. A Phase 2 study should launch in H1.

Kaleido Biosciences filed confidentially on September 25, 2018. Goldman Sachs, JPMorgan and Morgan Stanley are the joint bookrunners on the deal. No pricing terms were disclosed.

Steve’s Take: At this very early juncture, and with oceans of doubt about their therapies-in-progress, I suggest the order of likely success for these registrations coming public is:

Cirius, Kaleido, Alector, Anchiano and Brainsway.

Assuming INmune has at least the minimum offering amount in escrow and complies with the other closing conditions, its IPO should pop around the end of the month. It will begin its public-trading life as a tiny nanocap. And it is operating in an extremely-crowded field of immune-system cancer players with Merck’s mighty Keytruda the undisputed Goliath.

Perhaps INmune will be gobbled up before its IPO starts trading; it’s hard to predict these days as Big Pharmas can write a relatively small check and grab almost any INmune that comes along. I believe waiting to see how its candidates perform in clinical trials is definitely warranted here.

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