Annexon (ANNX) has filed to raise $150 million from the sale of its common stock in an IPO, according to an amended registration statement.
The company is developing treatments for autoimmune and neurodegenerative conditions.
ANNX is pursuing multiple treatment programs with primarily one candidate.
South San Francisco, California-based Annexon was founded to advance a pipeline of antibody treatments for diseases such as Guillain-Barre Syndrome [GBS] and Huntington's Disease.
Management is headed by president and Chief Executive Officer Douglas Love, Esq., who has been with the firm since 2014 and was previously Head of Operations and Strategic Alliances at Elan Pharmaceuticals where he led the multiple sclerosis franchise.
Below is a brief overview video of Guillain-Barre Syndrome:
Source: Mayo Clinic
The firm's lead candidate, ANX005, is a monoclonal antibody being tested against GBS and Warm Autoimmune Hemolytic Anemia as well as Huntington's Disease and Amyotrophic Lateral Sclerosis.
Below is the current status of the company’s drug development pipeline:
Source: Company S-1 Filing
Investors in the firm have invested at least $145 million and include Bain Capital, Clarus Lifesciences, New Enterprise Associates, Novartis Bioventures (NVS), Redmile Group, Muneer Satter trusts, Citadel and Zone II Healthcare.
Market & Competition
According to a 2018 market research report by Transparency Market Research, the global market for GBS treatment was valued at $454 million 2016 and is expected to reach $709 million by 2025.
This represents a forecast CAGR (Compound Annual Growth Rate) of 5.0% from 2017 to 2025.
Key elements driving this expected growth are a growing incidence of the disease, rising rate of diagnosis in developing countries and the increasing usage of off-label treatment options.
Also, North America is forecast to account for most demand followed by the Asia Pacific region, although the Asia Pacific region will likely grow at a faster rate of 6% during the period.
Major competitive vendors that provide or are developing treatments include:
- Rigel (RIGL)
- Alexion (ALXN)
- Momenta (MNTA)
- Ionis (IONS)
- Takeda (TAK)
- Wave Life Sciences (WVE)
- Voyager Therapeutics (VYGR)
- uniQure (QURE)
- F. Hoffmann-La Roche
- Others depending on the condition
Annexon’s recent financial results are typical of an IPO stage biopharma in that they show no revenue and substantial R&D and G&A expenses associated with advancing its pipeline through trials.
Below are the company’s financial results for the past two and ¼ years (Audited PCAOB for full years):
Source: Company registration statement
As of March 31, 2020, the company had $33.3 million in cash and $7.7 million in total liabilities. (Unaudited, interim)
ANNX intends to sell 10 million shares of common stock at a midpoint price of $15.00 per share for gross proceeds of approximately $150.0 million, not including the sale of customary underwriter options.
No existing shareholders have indicated an interest to purchase shares at the IPO price, a common feature of life science IPOs.
Assuming a successful IPO at the midpoint of the proposed price range, the company’s enterprise value at IPO would approximate $435.5 million.
Excluding effects of underwriter options and private placement shares or restricted stock, if any, the float to outstanding shares ratio will be approximately 31.99%.
Per the firm’s most recent regulatory filing, it plans to use the net proceeds as follows:
to advance ANX005 for the treatment of Guillain-Barré Syndrome, or GBS, and warm autoimmune hemolytic anemia, or wAIHA;
to advance ANX005 for the treatment of Huntington’s disease, or HD, and amyotrophic lateral sclerosis, or ALS;
to advance ANX007 for the treatment of geographic atrophy, or GA;
to advance our earlier-stage programs, including ANX009, and our next generation product candidates, including ANX105 and small molecule modulators of the classical pathway;
to fund our other research and development activities; and
the remainder for working capital and other general corporate purposes.
Management’s presentation of the company roadshow is available here.
Listed underwriters of the IPO are J.P. Morgan, BofA Securities and Cowen.
Annexon is seeking a larger than usual life science IPO transaction size to advance its pipeline of immune system and neurodegenerative system malfunction treatments.
For its lead candidate, ANX005, the company reported good tolerance in Phase 1 trials and that the drug showed ‘full inhibition of C1q and the classical complement pathway in Phase 1b trials.’
The next data readout for ANX005 in trials for various diseases is expected in the first half of 2021 at the earliest.
The market opportunities for most of the various diseases potentially treatable by the firm’s drugs are under $1 billion each.
Management has disclosed no research or commercial collaborations, although the firm counts major pharma firm Novartis among its investor syndicate, a positive signal.
J.P. Morgan is the lead left underwriter and IPOs led by the firm over the last 12-month period have generated an average return of 79.5% since their IPO. This is a top-tier performance for all major underwriters during the period.
As to valuation, management is asking IPO investors to pay an Enterprise Value that is within the typical range for biopharma IPOs, so the IPO appears reasonably valued.
The company isn’t pursuing large markets for each of its programs; rather it is essentially repurposing its ANX005 candidate for various disease conditions.
For life science investors with a long-term hold time frame, my opinion on the IPO is a BUY at up to $15 per share.
Expected IPO Pricing Date: July 23, 2020.
(I have no position in any stocks mentioned as of the article date, no plans to initiate any positions within the next 48 hours, and no business relationship with any company whose stock is mentioned in this article. IPO stocks can be very volatile in the days immediately after an IPO. Information provided is for educational purposes only, may be in error, incomplete or out of date, and does not constitute financial, legal, or investment advice.)
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