According to an amended registration statement, Checkmate Pharmaceuticals (CMPI) plans to raise $75 million from the sale of its common stock at an IPO.
The company is advancing a biologic particle treatment for melanomas and head & neck squamous cell carcinoma.
CMPI's pipeline is quite promising and the IPO appears reasonably priced.
Cambridge, Massachusetts-based Checkmate was founded to develop its candidate CMP-001, a Toll-like receptor 9, TLR9 'agonist delivered as a virus-like particle, or VLP.'
Management is led by Barry Labinger, who has been with the firm since December 2018 and previously served as president and CEO of Biothera Pharmaceuticals, a clinical stage immunotherapy company dedicated to cancer.
Here is a brief snapshot of skin cancers:
The firm's drug candidate 'is designed to trigger the body's innate immune system ... and directing activated anti-tumor T cells to attack both the injected tumor and also tumors throughout the body.'
CMP-001 has provided a '28 per cent best overall response rate, including post-progression responders.'
Below is the current status of the company's drug development pipeline:
Source: Company S-1 Filing
At least $191 million has been invested by the firm's investors including Sofinnova Ventures, venBio, Novo Holdings, Longitude Capital Partners, Decheng Capital, F-Prime Capital, Medicxi and Omega Fund.
The global demand for melanoma therapies is projected to hit $5.9 billion by 2023, according to a Research And Markets 2018 market research report.
This reflects a forecast of 12.62 per cent CAGR ( Compound Annual Growth Rate) from 2018 to 2023.
Continued exposure to ultraviolet light and population aging are key factors driving this anticipated increase related to reduced immune system functioning.
The HNSCC (Head and Neck Squamous Cell Carcinoma) market is also projected to hit $4.5 billion by 2027, rising at a estimated 17.3 percent from 2020 to 2027.
Therefore, the combined markets for the drug treatment pipeline of the business are expected to rise to around $10.4 billion by the late 2020s.
Large competitive vendors selling or developing treatments for the conditions set out above include:
- Exicure (OTC: XCUR)
- Idera Pharmaceuticals (IDRA)
- Amgen (AMGN)
- AstraZeneca (AZN)
- Bristol-Myers Squibb (BMY)
Recent financial results from Checkmate are indicative of a biopharmaceutical development stage in that they contain no sales and substantial R&D and G&A expenses associated with advancing its pipeline.
The financial statements for the last two and 1⁄4 years of the company (Audited PCAOB for full years) are below:
Source: Company registration statement
The company had $3.9 million in cash and $5.0 million in total liabilities as of March 31 , 2020. (Interim (Unaudited)
CMPI expects to sell 5.0 million common stock shares at a midpoint price of $15.00 per share for gross proceeds of about $75 million, excluding the selling of standard underwriter options.
No current shareholders expressed an interest in purchasing shares at the price of the IPO, a common feature of many life science IPOs.
Given a successful IPO at the midpoint of the estimated price range, the enterprise value at IPO for the company will be around $424.6 million.
With the exception of the effects of underwriter options and private placement shares or limited stock, if any, the float ratio to outstanding shares will be around 23.32%.
The firm plans to use the net proceeds as follows, according to the company's most recent regulatory filing:
approximately $25.0 million to fund the completion of a Phase 2 PD-1 refractory melanoma study with CMP-001 and supporting studies to enable a potential submission of a Biologics License Application seeking accelerated approval;
approximately $25.0 million to fund the development of CMP-001 in PD-1 naïve front-line melanoma;
approximately $8.0 million to fund the completion of a Phase 2 proof of concept study with CMP-001 in head and neck squamous cell carcinoma;
Approximately $35.0 million to fund research and development programs to support clinical trials and future commercial growth;
the remainder for working capital and general corporate purposes.
BofA Securities, Jefferies, BMO Capital Markets and BTIG are listed underwriters to the IPO.
CMPI is seeking a typical life science IPO transaction size to advance its CMP-001 candidate for the treatment of various cancers.
CMP-001 showed promising early stage trial results in conjunction with other melanoma drugs at various development levels.
Globally, the market prospects for the company's target therapies reach more than $10 billion, with strong levels of growth in the years ahead.
The firm has developed a clinical collaboration with Merck and Pfizer for testing CMP-001 in conjunction with avelumab.
The investor syndicate of the company comprises a range of well-known and highly regarded investment firms in biotech.
BofA Securities is the lead left underwriter and since their IPO, company-led IPOs have produced an average return of 49.5 percent over the last 12-month period. This is a top quality result during the period for all major underwriters.
As far as valuation is concerned, management is pursuing a suggested valuation within a standard range at IPO for the biopharmaceutical company, so the IPO appears to be fairly priced.
Checkmate’s pipeline is quite promising and the IPO is not overpriced, so for life science investors with a patient hold time frame, my opinion on the IPO is a BUY at up to $15.00 per share.
Expected IPO Pricing Date: August 6, 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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