Two IPOs to Kick off 2016 in Biotech

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The IPO arena is once again picking up pace in biotech, as companies that held off in the wake of wider market weakness towards the end of last year give a public capital raise a second (or in some cases, third) shot. Here are two freshly listed biotechs that have some near term upside catalysts.

Editas Medicine Inc. (NASDAQ:EDIT)

On February 3, 2016, Editas announced the closing of its NASDAQ IPO. The company raised $96 million on the sale of 5.9 million shares, with an average strike rice of $17 a share. It missed its target of $108 million, but the company’s share price rallied throughout its post-IPO session and made up for the miss. Towards the end of last week, however, and during this week’s Monday/Tuesday sessions, Editas shares have lost a significant portion of their value – last close put the company at $12.8 a share. This said, it maintains a healthy just-listed market cap just shy of $460 million, and presents an intriguing early allocation to the nascent gene editing space.

So what does the company do?

Its area of expertise, and the scientific root of its lead pipeline candidate, is what’s called CRISPR/Cas9. One of the major difficulties with gene editing in the past has been targeting. Getting the editor (in this case, a protein) to its required genomic location is tough, unpredictable, and, as a result, a difficult thing to harness for a large scale, replicable therapy. With this sort of treatment, the Cas9 (the protein) binds to RNA, and the RNA escorts the Cas9 to the genome it needs to alter, where it then does its editing.

It’s first target will be a rare blindness called Leber congenital amaurosis (LCA10). It’s a congenital condition that affects circa 1 in 80,000 individuals in the US, and currently has very limited treatment options. Don’t expect this one to be a quick turnaround. With no trials ongoing, and none slated for before early 2017, Editas is a long term allocation. With billionaire backers such as Bill Gates and Andreas Halvorsen (Viking Global), however, it could be going places. One to keep an eye on.

BeiGene, Ltd. (NASDAQ:BGNE)

BeiGene closed its offering just this week, through an ADS issue (this is standard for a company headquartered outside of the US – in this case, China). The company unloaded 7.59 million ADSs, each representing 13 ordinary shares, at a price of $24 per ADS, picking up a $182 million raise. It’s an oncology focus organization, with a pretty robust pipeline that targets a range of cancers, primarily through an immuno-oncology approach.

It’s lead candidate, and the likely driver of its valuation (at least near term) is a lymphoma (blood cancer) drug called BGB-3111. It’s a BTK inhibitor – something we’ve addressed a few times here at Market Exclusive in the past. For those not familiar with this class of drugs, they block what’s called BCR signalling. BCR signalling is responsible for cell proliferation, and by blocking it, BTK inhibitors force cancerous cells into apoptosis, which is the process through which cells die.

The most famous type of this drug is Ibrutinib, which the FDA approved back in 2013 for mantle cell lymphoma, and has since gone on to approve for leukemia and non-Hodgkin’s lymphoma. AbbVie Inc. (NYSE:ABBV) picked up the drug from Johnson & Johnson (NYSE:JNJ) back in May , 2015, and expects revenues of $5 billion annually by 2020. BeiGene is hoping to redirect some of these revenues towards its own financials. The company believes it can improve upon Ibrutinib’s pharmacokinetics with BGB-3111, and in doing so, can improve upon the former’s efficacy and safety profile. Hemorrhages and second primary malignancies are common AEs associated with the drug, and so any drug that reduces the rate and severity of AEs will likely be welcomed by the FDA – assuming efficacy is comparable.

Near term catalysts derive from two ongoing dose escalation studies – one in a B-cell lymphoid malignancies indication and another in a relapsed/refractory B-cell malignancies indication. The two trials are set for primary completion in June 2017 and December 2017 respectively, but interim analyses (likely due in the coming quarters) will offer mean time insight.

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