The Covid-19 pandemic has waylaid what was supposed to be an active year in biotech initial public offerings. Industry observers thought the few companies that did take the public plunge were likely to sell at a discount, but that wasn’t the case with Keros Therapeutics Inc. (KROS, Financial) or Zentalis Pharmaceuticals (ZNTL, Financial).
On April 13, Lexington, Massachusetts-based Keros closed its offering, raising more than $96 million by selling 6.9 million shares at $16 each. Keros hit the high end of its price range and sold 20% more shares than originally planned. Since the offering, the company’s shares have climbed more than 70% to about $27.50.
The cash haul will enable Keros to develop drugs that act on the transforming growth factor-beta family of proteins, according to an article in FierceBiotech. Because of the role the proteins play in producing blood cells and the growth of muscle and bone, Keros is confident it can develop large and small molecules that improve hematological and musculoskeletal disorders.
Keros’s successful IPO seems to reflect the long-term nature of the biotech industry. Investors aren’t focused on quarter-to-quarter performance of biotechs, according to Jordan Saxe, head of health care listings at Nasdaq. Instead, he stressed, “they’re looking at an average milestone readout that is at least 12 months from the IPO.”
Keros plans to start two phase 2 trials of its most advanced compound, one later this year and another in 2021. But the majority of the IPO money will be used to develop its most promising therapy for anemias and musculoskeletal disorders; two phase 2 trials of the drug are planned.
The indications Keros is targeting will pit it against drugs from Acceleron Pharma (XLRN, Financial) Astellas Pharma (TSE:4503, Financial), Bristol-Myers Squibb (BMY, Financial), FibroGen Inc. (FGEN, Financial) and Sierra Oncology Inc. (SRRA, Financial).
You could say that Keros is the first U.S. biotech IPO of the coronavirus era. The others, Imara Inc. (IMRA, Financial) and Zentalis, both started trading after the World Health Organization declared a pandemic, although they filed for IPOs before that.
New York City-based Zentalis, a clinical-stage developer of cancer therapies, raised more than $165 million at a top price of $18 during its coming out party in early April. Since then, its shares have climbed to more than $24. With three programs in clinical trials, the company should be considered in the middle stages of drug development, according to CEO Anthony Sun, M.D.
Imara didn’t fare as well. The Boston-based biotech was shooting to raise $86 million, but fell nearly $11 million short with its IPO priced at $16, just about where the stock trades today. The company is working on therapies to treat rare inherited genetic disorders of hemoglobin, such as sickle cell anemia.
Saxe thinks pent-up demand means there could still be more than 30 biotech and pharma IPOs this year, depending how fast social distancing requirements ease up.
“We are talking to companies still on file confidentially planning for IPOs later this year,” he said. “Whether or not they go and execute the roadshow depends on market conditions and other factors, but I think the feedback we’re getting is positive. No one is withdrawing their filings. People want to have the option to go out. They need to raise money to complete trials and keep progressing their drug forward.”
Disclosure: The author holds a position in Bristol-Myers Squibb.
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