BOSTON—In case you missed the memo, this was the year of the preclinical biotech cash out. Promising young startups are going public earlier than ever before, and seemingly, in droves. Already, three out of last year’s Fierce 15 class have pulled off IPOs: Gossamer Bio, Beam Therapeutics and FLX Bio, now called RAPT Therapeutics.
The public markets have certainly been receptive to early-stage companies in the last couple of years, but will the IPO remain open for these young companies? Or is it a bubble set to burst? We asked some of our 2019 Fierce 15 winners at this year’s awards reception what they thought and whether they would follow suit with a speedy IPO.
“I see us waiting a little,” said Keith Dionne, Ph.D, CEO of Casma Therapeutics, which is working on treatments targeting the cell's garbage disposal. “What we see when we look at that trend, is that there are a lot of great companies out there doing great things, but their news cycle just doesn’t match the public company news cycle."
Public markets want to see companies hitting clinical milestones, but if an earlier-stage biotech is only reaching them every year or so, its stocks are going to “languish” between events.
“It’s going to be very discouraging. We think the right timing is both when you need the money and when you have a news flow that you think matches the public cycle as opposed to the private cycle,” he said.
Nocion Therapeutics CEO Rick Batycky, Ph.D. and Celsius Therapeutics CEO Tariq Kassum, M.D. agreed: “I think it’s an open question if it’s a good thing and there have been a few preclinical IPOs. It’ll be interesting to see, especially in a public setting, how folks keep the news flowing, if you will,” Batycky said.
“I think that going public early can be beneficial but if you don’t have milestones in the near-term horizon, you can be in a precarious place because public markets can be less accommodating, Kassum said.
That said, he called going public early a “perfectly reasonable approach.”
“In biotechnology, unlike in tech, an IPO is not an exit; it’s a financing event along a long journey. Companies that are going public earlier are reacting to market forces that allow them to finance at an earlier point with a different set of investors,” he said.
As for their own plans? The consensus is to hold off, at least for a bit.
“One of the reasons I joined Nocion is we’re private,” said Batycky, who left Acorda Therapeutics to join Nocion, a company focused on treating conditions like cough and itch through its nociceptor platform. “We have a good series A. I am excited to stay private for a while and really build the team, build the culture and establish the foundation of the company before we entertain at what point we would think about going public.”
The ballooning early VC rounds certainly help. Maze Therapeutics, which launched earlier this year with $191 million, won’t be going public anytime soon. The company is working to figure out why some people with genetic mutations linked to severe disease end up having only mild symptoms.
“I can understand given uncertainty that’s coming up in the market potentially next year, that companies who are ready to go public are taking advantage of the opportunity to do it now,” said Tara Nickerson, Ph.D., the company’s chief business officer. “Given that Maze was just launched in 2019, we’re in the fortunate position that we have enough capital to ride through that so I wouldn’t think that we would be going public in that timeframe.”
A public debut is so far in the future for Dewpoint Therapeutics that the company “isn’t even looking at that,” said Chief Scientific Officer Mark Murcko, Ph.D.
“We have no plans to do an IPO—absolutely none. I think the trend is because if a company has a platform that looks like it’s broadly applicable, companies like that can sometimes consider going public if they can prove they... can really turn the crank repeatedly and produce multiple high-quality drug candidates,” Murcko said. “So, that’s the question: Do you believe that the platform is validated through multiple programs? If that’s true, then I think that supports earlier IPOs.”
Maze, Celsius and protein degradation player Kymera Therapeutics are all looking for a “sweet spot,” i.e., the perfect time to go public.
“Clearly, the market has accommodated earlier-stage companies as public entities and so, I think for us it will be a question of what is the right time, whether it be sometime next year or the year after. We’ll see what the future holds between now and then,” said Bruce Jacobs, Kymera’s chief financial officer.
“We’re going to try to find that ideal sweet spot of when we’ve built enough value to reward the investors that we have today, but also be able to keep momentum going through the public markets. Hopefully, we’ll have the luxury of being able to decide when that is,” Nickerson said.
Celsius, which is combining machine learning with single-cell sequencing is “probably” not going public this year, Kassum said.
“We want to get a critical mass of value-driving milestones in place. I’m from a forward-looking perspective—and then we’ll be ready to go public,” he said.
As we follow these companies and their IPO plans, as well as their transition from preclinical and clinical companies to commercial ones, where do they think they’ll be in 10 years? It’s a question young companies sometimes balk at, asking for a shorter time frame—what about in one year’s time, I was asked last year—but this year’s group was unfazed.
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“That’s easy—our goal is by circa 2030 having a drug on the market and a whole pipeline of compounds in late-stage clinical trials across multiple disease areas. We’re here to figure out how we can make drugs from a knowledge of cellular condensates,” Murcko said. “Condensates are everywhere, they’re found in all cell types, they’re relevant to all diseases and so our mission is to figure out how we can take that knowledge and transform that into great new drugs to treat patients who would otherwise have no options.”
“In 10 years’ time we would be really the premier company with a suite of treatments for this nociceptor inflammation, meaning we would now have the opportunity to have treatments for things like cough, things like vulvodynia, things like oral mucositis, ocular pain, all these things that are currently untreated or not treated very well,” Batycky said. “In 10 years’ time, we’ve got—it takes five years to get to market? We’ve got four products on the market, we’ve got a $5 billion market cap and most of us are still around,” he added.
Jacobs hopes that Kymera will be a successful commercial-stage company by then: “We want to be known as much more than just a great modality. We want to be a company that develops great drugs and that’s where we see ourselves 10 years from now and hopefully solving a lot of unmet needs.”
Dionne expects the same for Casma: “I see us as a fantastically successful company with novel treatments in 10 years that are on the market for a couple of rare genetic diseases and I see us seriously knocking on the door of some serious neurodegenerative diseases.”
Kassum and Nickerson see their companies at a slightly earlier stage by then, with several clinical programs “knocking on the door of approval” for Celsius and a broad portfolio of products in development both in-house and with partners for Maze.
"We’d be a public company with a very high valuation and really, we want to make sure that our platform is able to deliver meaningful therapies to patients, whether it’s through our own pipeline, through some of our partnering efforts, so that we can, we will continue to invest in the platform to make sure to drive toward that goal in 10 years’ time and beyond."