For a second straight week, a pair of biotechs carried out initial public offerings (IPOs) while a third took an alternative route to going public, fueling the optimism of investors who have long pined for a recovery of the markets.
Not all of the three did as spectacularly as CG Oncology (CGON) and ArriVent BioPharma (AVBP) did last week when they raised a combined $555 million, with CG Oncology’s shares nearly doubling on its first day of trading. This week’s three newly public companies included two whose IPOs raised a combined roughly $238.6 million, and a third company that is working to raise up to $38.45 million through a direct offering.
Faring best this past week was Alto Neuroscience (ANRO), which grossed $128.64 million through its upsized IPO, in which it sold 8.04 million shares of common stock at a public offering price of $16 per share. That’s the high end of its pricing range of $14–$16, and 20% more shares than the 6.7 million it planned to offer earlier this week.
Based on that earlier planned offering, Alto projected it would generate approximately $89.0 million in net proceeds—a figure rising to approximately $103.0 million if underwriters were to exercise in full their 30-day option to purchase an additional approximately 1.206 million shares at the IPO price, less underwriting discounts and commissions. A formal prospectus showing the revised projection of net proceeds had not been filed publicly at deadline.
Jefferies, TD Cowen, Stifel, and William Blair are acting as joint book-running managers for Alto’s IPO, with Baird acting as lead manager.
Alto shares soared 45%, to $23.27 at 12:55 p.m. ET before finishing their first trading day on the New York Stock Exchange settling for a 29% gain, finishing at $20.70.
Based in Los Altos, CA, Altos has committed itself to “redefine psychiatry” by developing personalized and highly effective treatments that apply insights into brain function and are tailored to specific patient populations.
Alto’s pipeline is led by a trio of clinical-phase candidates, two of which (ALTO-100 and ALTO-300) have successfully completed Phase IIa trials in more than 200 patients each. In Phase IIb trials, ALTO-100 has been assessed in 266 patients with major depressive disorder (MDD) characterized by a cognitive biomarker and ALTO-300, in 200 MDD patients characterized by an electroencephalography (EEG) biomarker.
Alto says it expects to report topline data on ALTO-100 in the second half of this year, and on ALTO-300 in the first half of 2025.
Before the end of June, Alto expects to launch Phase II proof-of-concept trials evaluating ALTO-101, a treatment for cognitive impairment associated with schizophrenia (CIAS) and ALTO-203, a treatment for MDD and higher levels of anhedonia. Topline data from ALTO-203 is expected in the first half of 2025, while ALTO-101 data is projected for release some time in 2025.
“Through insights derived from our scalable and proprietary Precision Psychiatry Platform, or our Platform, which applies rigorous data science and robust analytics to data gathered by neurocognitive assessments, electroencephalography, and wearable devices, we aim to discover brain-based biomarkers to better identify which patients are more likely to respond to our novel product candidates,” Alto stated in an amended Form S-1 Registration Statement, filed January 29.
Fractyl shows GUTS
Also carrying out an IPO this past week was Fractyl Health (GUTS), a developer of devices and drugs based in Lexington, MA. Fractyl raised gross proceeds of about $110 million by selling 7,333,333 shares at $15 a share during its IPO on Nasdaq.
Fractyl’s IPO was priced at the midpoint of its pricing range of between $14 and $16 a share, a price that would have raised its gross to $117.33 million. Net proceeds from the offer are estimated at about $99 million—a figure that grows to approximately $114.3 million if Fractyl’s underwriters exercise their 30-day option to buy an additional 1,099,999 shares at the IPO price, according to the company’s IPO prospectus, filed Friday.
On its first day of trading on Friday, Fractyl stayed below its IPO price all day, opening at $13.75 and climbing only to $14.50 before finishing the day falling 14%, to $12.85.
Fractyl aims to pioneer new approaches to the treatment of metabolic diseases, including type 2 diabetes and obesity. On the drug side, Fractyl’s Rejuva is a locally administered, adeno-associated virus (AAV)-delivered pancreatic gene therapy platform designed to enable long-term remission of type 2 diabetes and obesity by durably altering metabolic hormone function in the pancreatic islet cells of patients.
The first treatment based on the Rejuva platform, the glucagon-like peptide 1 (GLP-1) candidate RJVA-001, will be the subject of an IND application or IND-equivalent enabling studies the company plans to complete in the second half of 2024.
“If the IND, or IND-equivalent, for RJVA-001 is approved, we plan to initiate a first-in-human study in the first half of 2025,” Fractyl stated in its amended Form S-1 preliminary prospectus, filed January 29.
Fractyl’s lead candidate is a device—the outpatient procedural therapy Revita DMR System, designed to durably modify duodenal dysfunction, a trigger for type 2 diabetes and obesity in humans.
Direct listing swims, then sinks
A third biopharma that went public this past week, FibroBiologics (FBLG), offered 4,806,226 shares at $8 a share, for about $38.45 million in gross proceeds.
The shares roared out of the gate Thursday, beginning trading on Nasdaq at more than quadruple their IPO price, $33.05, then zoomed to an even $46 at 9:42 a.m. ET before tumbling 61%, closing at $17.75. Shares slid another 15.5% Friday on further profit taking by investors, to an even $15.
FibroBiologics chose to go public via a direct listing—an option typically exercised by companies that wish to go public but either cannot afford one or more underwriters, don’t want their control of shares to be diluted by public investors, or wish to avoid “lock-up” periods where company insiders cannot sell their shares.
In a direct listing, a company going public sells its shares directly to public investors, without underwriters acting as intermediaries. However, there’s no guarantee that investors will buy all the shares being offered for sale.
Houston-based FibroBiologics is a clinical-stage cell therapy company focused on developing and commercializing fibroblast-based therapies for patients with chronic diseases that have significant unmet medical needs—including degenerative disc disease, multiple sclerosis, wound healing, and certain cancers. FibroBiologics also develops treatments designed to extend life through involution reversal of the thymus and the spleen. The company was spun out of its former parent FibroGenesis in 2021.
FibroBiologics’ pipeline includes:
- CybroCell™, an allogeneic fibroblast cell-based therapy for degenerative disc disease. FibroBiologics has received IND clearance from the FDA—conditioned upon approval of the company’s master cell bank—to run a Phase I/II trial.
- CYMS101, an allogeneic fibroblast cell-based therapy designed to treat multiple sclerosis, for which the company expects to file an IND application for a Phase II trial. “We will likely seek a strategic partner to collaborate with us on the development of CYMS101 either before initiating the Phase II clinical trial, or after its completion, if successful, and prior to commencing with a Phase III clinical trial,” FibroBiologics stated.
- CYWC628, a late preclinical stage allogeneic fibroblast cell-based therapy for wound healing. The company said it plans to pursue an IND submission with the FDA as early as this year.
Kyverna eyes up-to-$211M IPO
Also during the week, a fourth biotech filed paperwork to go public, with the expectation that it will launch an IPO this coming week. Kyverna Therapeutics (KYTX) revealed plans to sell 11.12 million shares on the Nasdaq Global Market at between $17 and $19 through an IPO.
Based in Emeryville, CA, Kyverna focuses on developing cell therapies for patients suffering from autoimmune diseases. The company’s lead program, KYV-101, is an autologous CD19 chimeric antigen receptor T-cell (CAR T) candidate made from an underlying CAR the company has licensed from the NIH.
That underlying CAR, according to Kyverna, showed improved tolerability in the clinic among adult oncology patients using the same CAR construct in KYV-101, compared with the CAR used to create Gilead Sciences’ Yescarta® (axicabtagene ciloleucel).
Kyverna intends to develop KYV-101 in rheumatology and neurology. The company’s initial rheumatology development focus is on lupus nephritis (LN) and systemic sclerosis (SSc). Kyverna is conducting two trials of KYV-101 in patients with LN, and has received IND clearance in October 2023 for a Phase I/II trial in SSc.
In neurology, Kyvern’s focus will be on myasthenia gravis (MG) and multiple sclerosis (MS). The company received IND clearance in November 2023 for a Phase II trial in MG, followed a month later by IND clearance for a Phase II study in MS.
“We believe our approach may present a significant advantage over current standard-of-care therapies for autoimmune diseases by aiming to directly deplete B cells and potentially resetting disease-contributing B cells,” Kyverna stated in an amended Form S-1 registration statement filed Thursday.
2seventy surges 62% on restructuring
The old saying “third time’s the charm” applies this week to 2seventy Bio (TSVT), as the cancer-focused drug developer’s shares enjoyed a 62% surge after wowing investors and analysts with its third different structure of operations in less than three years.
2seventy shares rocketed over four days from $3.49 on Monday to $5.64 at 10:25 a.m. Friday, before settling for a 50% gain, closing at $5.25. The surge came after the company announced a restructuring that entailed eliminating 14% of its workforce—about 30 jobs—and selling its cell therapy pipeline and operations to Regeneron Pharmaceuticals for at least $15 million.
The restructuring also calls for limiting 2seventy’s focus to further developing its sole marketed drug Abecma® (idecabtagene vicleucel or “ide cel”), the B-cell maturation antigen (BCMA)-directed genetically modified autologous T cell immunotherapy co-marketed with Bristol Myers Squibb (BMS).
“While the decision to reshape 2seventy was driven by a series of challenging realities, it has resulted in an outcome that we believe is right for patients, employees, and our shareholders,” Nick Leschly, 2seventy’s top executive or “chief kairos officer,” said in a statement. Leschly will step down from 2seventy’s helm upon completion of the restructuring and become the company’s board chair, while COO Chip Baird will ascend to CEO.
2seventy is the former oncology business of Bluebird Bio (BLUE), spun out in 2021. Last September, 2seventy restructured operations again, in the process eliminating about 40% of its then-workforce, 176 jobs.
Daina M. Graybosch, PhD, senior managing director, immuno-oncology and a senior research analyst with Leerink Partners, and two colleagues wrote in a January 31 research note that the restructuring positions the company better for acquisition—and aligns with feedback the company has received from investors, especially activist investor Engine Capital, which holds about 3% of 2seventy’s shares.
In a December 6 letter, Engine Capital urged 2seventy’s board to limit the company’s focus to Abecma; immediately cease or sell off non-Abecma pipeline programs; replace Leschly as CEO with Baird; create a special committee of independent directors to communicate with investors and oversee a “wind down” of 2seventy’s non-Abecma pipeline; and add a shareholder representative to the board who is not former Bluebird Chairman Daniel Lynch since he served when Leschly was Bluebird’s top executive or “chief bluebird.”
Graybosch and colleagues also upgraded 2seventy’s stock from “Market Perform” to “Outperform,” and more than tripled (260%) Leerink’s 12-month price target on company shares from $5 to $18.
TD Cowen downgrade
However, Yaron Werber, MD, managing director, health care-biotechnology with TD Cowen, downgraded 2seventy shares from “Outperform” to “Market perform.”
Werber cited the company’s singular focus on Abecma, which won FDA approval in 2021 for its sole indication of adults with relapsed or refractory multiple myeloma after four or more prior lines of therapy, including an immunomodulatory agent, a proteasome inhibitor, and an anti-CD38 monoclonal antibody. Under the name ide-cel, the drug is in clinical studies for earlier line treatment of multiple myeloma.
“The company’s commercial outlook now hinges solely on Abecma, which is losing market share in the face of increasing competition from both Carvykti® [ciltacabtagene autoleucel, co-marketed by Legend Biotech and Johnson & Johnson’s Janssen Biotech] and bispecifics, with several other promising CAR T competitors in development,” Werber wrote in a January 30 research note. “Given our longstanding view that Abecma will face commercial headwinds, we are now moving to the sidelines as the stock is a pure play.”
“Pure play” companies are those that focus all their resources and energies on a single business line.
2seventy’s sole focus on Abecma makes it crucial for the company to gain approval in third-line multiple myeloma, the focus of a future hearing by the FDA’s Oncologic Drugs Advisory Committee, Werber observed. “We do believe that Abecma will garner approval given its overall profile and that is not the reason for this downgrade. However, the long-term outlook remains cloudy even with 3L approval, given that Carvykti is poised to move into 2L MM [second-line multiple myeloma] ahead of Abecma.”
The most likely positive outcome for 2seventy, Werber concluded, would be to find a buyer for Abecma: “We see BMS as most obvious buyer.”
Leaders & Laggards
- Atara Biotherapeutics (ATRA) shares nearly doubled, zooming 97% over two days from $0.62 to $1.22 Friday after the company joined Pierre Fabre Laboratories on Wednesday following the close of markets to announce publication in The Lancet Oncology of data from the pivotal Phase III ALLELE trial (NCT03394365) assessing Ebvallo™ (tabelecleucel or “tab-cel®”) in treating Epstein-Barr virus-associated post-transplant lymphoproliferative disease (EBV+ PTLD). ALLELE met its primary endpoint as 22 of 43 EBV+ PTLD patients achieved an objective response (51.2% objective response rate). Patients responding to tab-cel had longer survival, with an estimated one-year overall survival of 84.4% for responders versus 34.8% for non-responders. The median duration of response was an even 23 months, while the median overall survival was 18.4 months.
- NeuroBo Pharmaceuticals (NRBO) shares rocketed 67% from $3.27 to $5.47 on Thursday, after the FDA cleared the company’s IND application for DA-1726, a novel, dual oxyntomodulin (OXM) analog agonist that functions as a glucagon-like peptide-1 receptor (GLP-1R) and glucagon receptor (GCGR). The company plans to initiate a Phase I clinical trial of DA-1726 for the treatment of obesity in the first half of this year. “It is our belief that DA-1726 may have a better tolerability profile than currently available GLP-1 agonists due to its balanced activation of GLP1R and glucagon receptors. We look forward to dosing the first patient with DA-1726 during the first half of this year with an expected data readout in the first half of 2025,” said NeuroBo president and CEO Hyung Heon Kim.
- PepGen (PEPG) shares leaped 71% over four days, from $7.25 on January 29 to $12.39 on Thursday, after competitor Sarepta Therapeutics (SRPT) reported positive data from Part B of the global Phase II MOMENTUM trial (SRP-5051-201; NCT04004065) evaluating SRP-5051 (vesleteplirsen) in patients ages 8–21 with Duchenne muscular dystrophy who are amenable to exon 51 skipping. At the high dose (~30 mg/kg every 4 weeks), mean dystrophin expression with SRP-5051 was 5.17%, and mean exon skipping 11.11% at 28 weeks—a 12.2-fold increase in dystrophin expression and a 24.6-fold increase in exon skipping vs. eteplirsen (30 mg/kg weekly) at 24 weeks. SRP-5051 is a next-generation peptide phosphorodiamidate morpholino oligomer (PPMO) treatment. PepGen’s lead clinical candidate for the treatment of DMD, PGN-EDO51, is also designed to skip exon 51 of the dystrophin transcript. Sarepta shares inched up 0.6%, from $120.50 to $121.27.