Pandion Therapeutics (PAND) aims to raise $93.5 million from the sale of its common stock in an IPO, according to an amended registration statement.

The company is developing treatments for serious gastrointestinal and liver immune diseases.

PAND is in Phase 1 trials for its lead candidate and still in preclinical stage for its other candidates, so is still at a very early stage.

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Watertown, Massachusetts-based Pandion was founded to advance a pipeline of treatments for ulcerative colitis and various gastrointestinal and liver immune diseases.

Management is led by Mr. Rahul Kakkar, M.D., who has been with the firm since August 2019 and was previously founder and Chief Medical Officer at Corvidia Therapeutics, a privately held biopharma firm.

Below is a brief overview video of ulcerative colitis:

Source: Animated IBD Patient

The firm's lead candidate, PT101, is in Phase 1 trials for the treatment of ulcerative colitis.

In in vitro studies, the compound activated Treg cells without activating proinflammatory cells, holding the possibility that it will act to 'rebalance a dysregulated immune network in the context of autoimmune disease.'

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

pandionpipe

Source: Company S-1 Filing

Investors in the firm have invested at least $108 million and include Versant Venture Capital, Polaris Partners, Roche (RHHBY), S.R. One, AI Pan and Boxer Capital.

According to a 2020 market research report, the global market for ulcerative colitis treatments was valued at $6.8 billion in 2018 and is expected to reach $10.25 billion by 2027.

This represents a forecast CAGR (Compound Annual Growth Rate) of 4.6% from 2019 to 2027.

Key elements driving this expected growth are increasing treatment options due to continued medical research to reduce or eliminate symptoms and improve colon healing.

Also, the Asia Pacific region is expected to produce the fastest growth rate by region, growing at a CAGR of 5.1% during the period and accounting for 8% of the global market by 2027.

Major competitive vendors that provide or are developing treatments include:

  • Amgen
  • Nektar Therapeutics
  • Roche
  • Celgene
  • Synthorx
  • Moderna
  • Xencor
  • AnaptysBio
  • Eli Lilly & Co.
  • Others

Pandion’s recent financial results are typical in that the firm has received very little revenue and has significant R&D and G&A expenses associated with advancing its pipeline through the development process.

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

pandionpl

Source: Company registration statement

As of March 31, 2020, the company had $67.7 million in cash and $15.2 million in total liabilities. (Unaudited, interim)

PAND intends to sell 5.5 million shares of common stock at a midpoint price of $17.00 per share for gross proceeds of approximately $93.5 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 $382.5 million.

Excluding effects of underwriter options and private placement shares or restricted stock, if any, the float to outstanding shares ratio will be approximately 20.76%.

Per the firm’s most recent regulatory filing, it plans to use the net proceeds as follows:

approximately $55.0 million to advance the development of PT101, including our Phase 1a clinical trial in healthy volunteers and our planned Phase 1b/2a clinical trial for the treatment of patients with moderate-to-severe ulcerative colitis;

approximately $38.0 million to continue research and development of PT627 and PT001, including preclinical research, IND-enabling studies and a Phase 1a clinical trial for each of PT627 and PT001;

approximately $23.5 million to continue research and development of PT002 and our TALON discovery programs; and

the remainder for working capital and other general corporate purposes.

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

Listed underwriters of the IPO are Goldman Sachs, Morgan Stanley, SVB Leerink and BMO Capital Markets.

Commentary

PAND is seeking public market funding to advance its portfolio of gastrointestinal and liver disease treatment candidates.

For its lead candidate, PT101, the firm is currently in Phase 1 safety trials.

The next data readout is expected for PT101 in the first half of 2021, so that is likely the first milestone-based catalyst for the stock.

The rest of its portfolio is still in a preclinical stage of development, so the firm is still at a very early stage of development.

The market opportunity for treating ulcerative colitis is quite large but expected to grow only moderately in the years ahead.

Management has disclosed no research or commercial collaboration relationships, so is pursuing a go it alone approach at this time.

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 83.9% 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 of $383 million for its stock at IPO.

This proposed valuation is in the middle of the typical range for biopharma IPOs, so is not unreasonable.

In my view, the firm is still at a very early stage of development, so the IPO is more of a venture round suited more to institutional investors than to individual investors.

My opinion on the IPO is NEUTRAL.

Expected IPO Pricing Date: July 16, 2020.

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

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