Kronos Bio (KRON) intends to raise $175 million in an IPO of its common stock, according to an S-1 registration statement.
San Mateo, California-based Kronos was founded to develop inhibitor treatments for acute myeloid leukemia and MYC-amplified solid tumors.
Management is headed by president and CEO Mr. Norbert Bischofberger, Ph.D., who has been with the firm since April 2018 and was previously EVP, Research & Development and Chief Scientific Officer at Gilead Sciences (GILD).
Below is a brief overview video of the causes and symptoms of acute myeloid leukemia [AML]:
The company's lead candidate, Entospletinib [ENTO], is being developed to treat various types of acute myeloid leukemia.
The firm expects to initiate a Phase 2/3 trial in 2021 and have an initial readout of data by 2023.
Below is the current status of the company’s drug development pipeline, with other programs in discovery phase:
Source: Company S-1 Filing
Investors in the firm have invested at least $123 million and include Omega Fund and Vida Ventures.
According to a 2019 market research report by MarketsAndMarkets, the global market for leukemia therapeutics was an estimated $12.3 billion 2019 and is expected to exceed $17 billion by 2024.
This represents a forecast CAGR (Compound Annual Growth Rate) of 6.8% from 2019 to 2024.
Key elements driving this expected growth are a growing incidence of disease among an aging global population, a broader set of treatment options amid growing awareness and distribution of treatments.
Also, below is a chart that shows the historical activity and forecast growth of leukemia treatments by year and region:
Major competitive vendors that provide or are developing treatments include:
- Rigel Pharmaceuticals (RIGL)
- Hutchison Medipharma
- Syndax Pharmaceuticals (SNDX)
- Kura Oncology (KURA)
- AbbVie (ABBV)
- Jazz Pharmaceuticals (JAZZ)
- Bristol-Myers Squibb (BMY)
Kronos’s recent financial results are typical of a development stage biopharma in that they feature no revenue and significant R&D and G&A expenses associated with its research efforts.
Below are the company’s financial results for the past two and ½ years (Audited PCAOB for full years):
Source: Company registration statement
As of June 30, 2020, the company had $38 million in cash and equivalents and $35.6 million in total liabilities. (Unaudited, interim)
Kronos intends to raise $175 million in gross proceeds from an IPO of 10.3 million shares of its common stock, offered at a proposed midpoint price of $17.00 per share.
No existing shareholders have indicated an interest to purchase shares at the IPO price.
Assuming a successful IPO, the company’s enterprise value at IPO would approximate $834.7 million, excluding the effects of underwriter over-allotment options.
Management says it will use the net proceeds from the IPO as follows:
approximately $80.0 million to $90.0 million to fund our planned registrational Phase 2/3 clinical trial of ENTO in combination with IC in AML patients with NPM1 mutations, which includes a $29.0 million milestone payment by us to Gilead upon the initiation of this trial;
approximately $20.0 million to $30.0 million to fund our planned Phase 1/2 clinical trial of KB-0742 for the treatment of advanced solid tumors; and
the remainder for additional development activities for our SYK and CDK9 programs, continued discovery and preclinical development of additional product candidates, as well as headcount costs, working capital and other general corporate purposes.
Management’s presentation of the company roadshow is not available.
Listed bookrunners of the IPO are Goldman Sachs, Jefferies, Cowen and Piper Sandler
Kronos is seeking public capital market funding to advance its lead candidate into Phase 2/3 trials, which won’t likely begin until late 2021 or 2022, depending on its meetings with the FDA.
Upon trial start, KRON is scheduled to receive a milestone payment of $29 million from collaboration partner Gilead.
The firm’s lead candidate has potentially several avenues to successful treatment, including in combination with induction chemotherapy
The market opportunity for treating various types of leukemia is large and expected to grow at a substantial rate in the years ahead, as the global population ages and incidence increases.
Goldman Sachs is the lead left underwriter and IPOs led by the firm over the last 12-month period have generated an average return of 56.7% 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 well above the typical range for a clinical stage biopharma firm at IPO.
KRON has produced impressive Phase 1b/2 trial results with high complete response rates, especially with patients with high HOX/MEIS mRNA as ‘more likely to benefit from the addition of ENTO [the firm’s lead candidate] to IC [induction chemotherapy].’
The company is also exploring combination opportunities with other agents in the AML cancer field.
Although the IPO isn’t cheap, for life science investors with a hold time frame of 24 to 36 months, my opinion on the IPO is a BUY at up to $17.00 per share.
Expected IPO Pricing Date: October 8, 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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