IPO Preview: Nkarta Starts $100 Million IPO Effort

IPOStreet

Nkarta (NKTX) intends to raise $100 million in an IPO of its common stock, according to an S-1 registration statement.

The firm is developing a pipeline of drug treatments for blood and other cancer conditions.

NKTX is preparing to enter Phase 1 trials for its lead candidates, so the firm is still at a very early stage of development.

I’ll provide a final opinion when we learn more about the IPO from management.

South San Francisco, California-based Nkarta was founded to engineer what it calls natural killer [NK] cell therapies to treat blood and other cancers.

Management is led by president and Chief Executive Officer Mr. Paul Hastings, who has been with the firm since 2018 and was previously president, CEO and Chairman of OncoMed Pharmaceuticals (OMED) and held similar positions at QLT.

Below is a brief overview video of acute myeloid leukemia:

Source: Osmosis

The firm's two co-lead candidates, NKX101 and NKX109, are being developed to treat acute myeloid leukemia [AML] and myelodysplastic syndrome [MDS].

Below is the current status of the company’s drug development pipeline:

nkartapipe

Source: Company S-1 Filing

Investors in the firm have invested at least $60 million and include RA Capital, New Enterprise Associates, Novo Holdings, S.R. One, Samsara BioCapital, Deerfield Management, LSP and others.

According to a 2019 market research report by MarketsandMarkets, the market for leukemia therapeutics was $12.3 billion in 2019 and is expected to reach $17.1 billion by 2024.

This represents a forecast CAGR (Compound Annual Growth Rate) of CAGR of 6.8% from 2019 to 2024.

Key elements driving this expected growth are increasing incidence of disease among an aging global population, wider set of treatment options and growing awareness of treatments.

Below is a chart showing the historical activity and forecast growth by year and region:

nkartmarket

Major competitive vendors that provide or are developing treatments include:

  • Fate Therapeutics (FATE)
  • CRISPR Therapeutics (CRSP)
  • Allogene (ALLO)
  • Cellectis (CLLS)
  • Celularity
  • Celyad (CYAD)
  • Takeda Pharmaceutical (TAK)
  • Celgene (CELG)

Below is a company-supplied competitive landscape for allogeneic cell therapies:

nkartacompetition

Nkarta’s recent financial results are typical in recent periods for a biopharma firm in development and trial stages in that they feature little or no revenue and significant R&D and G&A expenses.

Below are the company’s financial results for the past two and ¼ years (Audited PCAOB for full years):

nkartapl

Source: Company registration statement

As of March 31, 2020, the company had $90.4 million in cash and $15.0 million in total liabilities. (Unaudited, interim)

Nkarta intends to raise $100 million in gross proceeds from an IPO of its common stock, although the final amount may be different.

No existing shareholders have indicated an interest to purchase shares at the IPO price, although that has been a feature of many successful life science company IPOs.

Management says it will use the net proceeds from the IPO ‘to fund the development of NKX101, to fund the development of NKX019, to fund the development of Program 3,
to fund the development of our NK+T program, to fund the initial buildout and qualification of our commercial cGMP facility; and the remainder for our other pipeline candidates and general corporate purposes.’

Management’s presentation of the company roadshow is not available.

Listed bookrunners of the IPO are Cowen, Evercore ISI, Stifel and Mizuho Securities.

Commentary

Nkarta is seeking funding to advance its pipeline into initial trials, so the firm is still at a very early stage of development.

The firm’s co-lead candidates are still in pre-clinical stages of development, with the firm planning to begin dosing patients for its NKX101 Phase 1 safety study by the end of 2020.

The market opportunity for treating AML and MDS cancer conditions is large and expected to grow at a moderate rate over the coming years as populations age and have lowered immune system function to prevent cancer conditions.

The firm had a previous collaboration relationship with GlaxoSmithKline (GSK) which was terminated in December 2018.

Cowen is the lead left underwriter and IPOs led by the firm over the last 12-month period have generated an average return of negative (11.1%) since their IPO. This is a lower-tier performance for all major underwriters during the period.

NKTX is still at a preclinical stage, so the IPO is really more of a venture capital round that may be more suited to institutional investors with long hold time horizons rather than individual investors, unless you want to act like a VC with a very long hold time frame.

I’ll provide a final opinion when we learn more about the IPO from management.

Expected IPO Pricing Date: To be announced.

Glossary Of Terms

(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 incomplete or out of date, and does not constitute financial, legal, or investment advice.)

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