Last week, AvroBio and Magenta Therapeutics priced their IPOs on the same night. Less than three months earlier, Unum Therapeutics priced its IPO.
All three biotech companies are emerging leaders in the cell and gene therapy space, broadly defined. They are now well financed for the next chapter in their respective journeys to bring new potentially transformative therapies to cancer, rare disease, and autoimmune patients.
All three are also companies that I’ve had the good fortune and privilege of playing a small part in shaping, serving as chairman of both Unum and AvroBio and being a founding investor/director of Magenta. Participating in three IPOs in less than three months has been a fun and eye-opening experience, so I thought it might be worth sharing a few reflections on these stories, the broader IPO market, and cell and gene therapy.
For context, here’s a quick background of each.
- Unum ($UMRX) is a cellular immunotherapy platform leveraging its antibody-coupled T cell receptor (ACTR) technology in combination with tumor-targeting antibodies to activate the body’s own immune system to fight cancer; Unum has three active clinical programs in lymphoma and myeloma (for a past blog, see here).
- AvroBio ($AVRO) is focused on developing potentially curative ex vivolentiviral-based gene therapies to treat rare diseases following a single dose, with a lead program in Phase 2 for Fabry Disease, and several preclinical programs addressing other lysosomal storage diseases (see here, here)
- Magenta ($MGTA) is developing therapeutics focused on critical areas of unmet need in the field of hematopoietic stem cell bone marrow transplant for patients with autoimmune diseases, blood cancers and genetic diseases, with programs focusing on conditioning, mobilization, and expansion, including an active Phase 2 program (see here, here).
These are three of over 30 biotech IPOs so far in 2018, which is tracking to be a top quartile year for IPO volume and value since the beginning of the industry. As predicted back in January, the first half of 2018 has been incredibly busy as the backlog of well-funded companies transition to the public markets. June is tracking to be the busiest month of all time, with potentially 15 priced IPOs, topping July 2014’s 11 offerings. And last Wednesday, June 20th, saw five IPOs get priced – a record – beating out February 2, 2014’s four IPOs. I must admit it was rather surreal to be tracking two simultaneous roadshows and then being on two IPO pricing calls on the same night.
Beyond these three, a number of other great companies have accessed the public markets, with a wide range in post-offering performance (as covered by Damian Garde at Stat News and John Carroll at Endpoints). There’s also a pipeline of at least 6 companies with pending offerings over the coming month or so.
Atlas has also been fortunate to see several other portfolio companies IPO in the first half of 2018: immuno-oncology player Surface Oncology went public in April, and mRNA-focused Translate Bio priced its IPO last night.
There are at least five general drivers for this wave of new issuances in biotech, across all therapeutic subsectors: first, the pace of innovation and the delivery of value to patients continues to accelerate (e.g., positive new data over past year in SMA, DMD, NSCLC, AML, myeloma, DLBCL, etc); second, significant private funding has poured into later stage private companies (in fact, the most private funding in the 40-year history of biotech) helping them scale faster and preparing them for nearer-term entry into the public markets; third, keen appetite for higher growth biotech stocks from public investors, weary of a dearth of growth stories in larger cap biotech and other sectors; fourth, the recycling of capital from M&A into “new” biotech stories; and, fifth, an expectation of continued M&A as Pharma secures more of their pipelines externally.
The enthusiasm for cell and gene therapy (CGRx) plays, of which Avro, Magenta, and Unum represent, reflect those general biotech tailwinds, but is magnified by the large therapeutic effect sizes seen with these CGRx therapies. Durable CRs and potential one-and-done cures seem within reach of these therapies. And these effects often reveal themselves with very small numbers of patients, making early clinical value inflections possible. Further, the CGRx field has reached a tipping point: like other overnight successes 30 years in the making (with early CART and gene therapy concepts articulated in the late 1980s), things have begun to truly click in the past 5-10 years. Advances in viral vectors, construct engineering, cell processing, and transplantation have all converged to create momentum in the sector and enable impressive clinical data: CD19 and BCMA CARTs in cancer, AveXis’ in SMA, Sarepta’s recent data in DMD, Spark’s in rare blindness, BMT in multiple sclerosis, CALD lenti data from bluebird, etc… These therapies are presenting early data with real curative potential – which was unheard for these diseases before CGRx.
Much of this CGRx enthusiasm is captured in an October 2017 blog post, Living Medicines With Curative Intent, and underpins the positive investor interest in the space. As of today, bluebird and Sarepta have $9B+ valuations, Spark is above $3B, and Audentes is above $1.5B – as a few examples. Furthermore, recent M&A in the field has added fuel to the fire in CGRx more broadly – including cancer immunotherapy, gene therapy, and cell therapies: AveXis’ recent acquisition by Novartis for $9B and both Kite and Juno’s $10B+ acquisitions by Gilead and Celgene, respectively. A number of other cell and/or gene therapies have priced their IPOs in 2018, including Autolus, Homology, Solid, and MeiraGTx, to name a few.
It’s against this market backdrop that Avro, Magenta, and Unum entered the public markets; across all three, they’ve now raised a combined ~$300M from their IPOs to continue advancing their clinical pipelines and powering up their product discovery platforms.
Beyond being three of my portfolio companies, their near simultaneous IPO debuts, and them all working hard to bring the next generation of cell and gene therapies to patients, these three share a number of other similarities with regard to their origins:
- Founded on cutting-edge academic science. Unum’s foundational ACTR technology came from Dario Campana at Duke/NUS in Singapore; Avro’s lead Fabry program originated from the University Hospital Network in Toronto; and, Magenta’s principal scientific founder is David Scadden at Harvard. During their formative moments, all three partnered with these key academics, as well as others, to help catalyze their creation. Unum’s and Avro’s lead programs were essentially peri-IND/CTA at the time of their initial financings due to the work of their founding academic partners.
- These three began life embedded in healthy startup “communities”. All three of these started around Technology Square in Cambridge. Magenta and Avro both incubated at Atlas (in offices next door to each other) as part of our venture creation process for much of their formative period, while Unum incubated at LabCentral right down the street. The Cambridge/Boston startup community played a key role in establishing a nurturing ecosystem for venture formation and early traction.
- All three trajectories from founding to IPO have been incredibly fast by historic metrics. Unum went from its initial financing to IPO in 3.5 years; Avro and Magenta were closer to 2.5 years. All three of these, therefore, had very short tenures as private companies relative to biotech history; for comparison, the average time to IPO in biotech only a few years ago was over 7 years (here). Accessing the public markets early will help them scale their programs and platforms.
- Initial positive clinical data helped drive investor interest. These were not preclinical concept stories; all three have initial clinical data prominently described in their S-1’s, which is part of the reason for their fast trajectory described above. While not a requirement for an IPO today, clinical data is often a catalyst for broader interest by public market investors.
- Early business development deal-making was important for accessing key programs. Unum struck an early partnership with Seattle Genetics to secure access to two tumor-targeting antibodies, including one for BCMA; Avro sourced several additional ex vivo lenti programs for lysosomal storage diseases from academic groups around the world (here, here, here), as well as from BioMarin; and Magenta partnered with Novartis to secure a clinical-stage stem cell expansion asset (co-discovered by Magenta’s CSO), as well as with Heidelberg Pharma around ADC technology. These were BD deals designed to augment their pipelines/platforms in a strategic, not serendipitous, manner.
The CEOs of these three companies are exceptional, and it’s been a real pleasure to work with them. A few other similarities exist across them:
- All three CEOs are co-founders of their companies: it’s not super common to have the biotech founder-CEO fit the CEO role’s needs from inception into the public markets, but these three are great leaders and have focused on building high impact corporate cultures.
- They are all first-time public CEOs (and two, Chuck and Jason, are first-time CEOs entirely); while new to the role and context, they have deep executive experiences to draw on, and solid management teams working with them.
- All three CEOs are foreign-born entrepreneurs, which is a common background in our industry and Atlas’ portfolio (as discussed previously). Biotech is a global business, and Cambridge/Boston is a talent aggregator from around the world.
Beyond the CEOs, there are strong, experienced management teams at all three companies with deep expertise in cell and gene therapy, as well as oncology, autoimmunity, and rare disease. Further, it’s a diverse group, and female executives play critical roles on these management teams: Unum’s president/CFO Christiana Stamoulis; Avro’s CMO Nerissa Kreher, CFO Katina Dorton, CBO Deanna Peterson, and co-founder/head of operations Kim Warren; and Magenta’s CBO Christina Isacson and VP of Investor Relations Manisha Pai, to name a few. Attracting, retaining, and cultivating diverse talent is a critical growth issue for all companies, and these three are focused on it.
To close, it’s worth emphasizing that IPOs are only a step along the journey. It’s a watershed moment for an emerging biotech, as it opens up new opportunities for financing the growth of the company over time. And IPOs set up eventual liquidity for earlier stage shareholders as the investor mix evolves over time. Importantly, though, IPOs are not exits – no one is selling their stock – but instead these debuts help unlock value over the long term.
We’re honored to work with these great teams, and pleased to have a great group of new public investors join us in these stories. We’re also excited to watch where these and other IPOs in the Class of 2018 go over the coming years. Onward and upward.