Despite Government Shutdown, Kaleido and Cirius File for IPOs

toy forklift moving blocks with letters IPO

Despite the government shutdown, two biotech companies, Kaleido Biosciences and Cirius Therapeutics, have filed with the U.S. Securities and Exchange Commission (SEC) for initial public offerings (IPO). During the shutdown, the SEC is running with “very limited staff” but its electronic system for regulatory filing is still in operation.

Kaleido Biosciences focuses on developing Microbiome Metabolic Therapies (MMT) across a range of therapeutic areas, including rare genetic diseases. The company was founded in 2015 and has raised approximately $165 million from its founder Flagship Pioneering and several leading investors, including a wholly-owned subsidiary of the Abu Dhabi Investment Authority (ADIA), Fidelity Management and Research Company, Invus, and Rock Springs Capital.

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On June 25, 2018, Kaleido closed on an oversubscribed Series C financing worth $101 million. The company indicates it has a library of more than 1,000 MMT candidates. Its lead candidate is KB195, which recently completed a Phase I trial in hyperammonemia. The company indicates it could potentially treat urea cycle disorder (UCD) and hepatic encephalopathy (HE).

Kaleido expects to use the IPO proceeds, for which it has set a preliminary target of $100 million, to advance KB195 into a Phase II trial in hyperammonemia patients with UCD in the first half of this year. It is also evaluating KB195 as well as KB174 for HE.

Cirius Therapeutics focuses on developing therapies for liver and metabolic diseases. Its MSDC-0602K is being developed for nonalcoholic steatohepatitis (NASH) with fibrosis. It is currently in a Phase IIb trial and the company expects to report final data in the second half of this year.

In October 2018, the company released interim data from the Phase IIb trial, which showed patients receiving the drug had significant improvements in liver function and insulin resistance at six months.

“We believe these interim results around improved measures of liver function and glycemic control, together with the preliminary adverse event profile, support MSDC-0602K’s potential to be used in the treatment of NASH with fibrosis, including for those patients with Type 2 diabetes, a group which represents approximately 50 percent of patients with NASH,” stated Howard Dittrich at the time, Cirius’ chief medical officer. “These results support the view that therapies directed toward the MPC have the potential to achieve insulin sensitizing pharmacology with an improved profile over first-generation insulin sensitizers. We look forward to presenting full data to the scientific community.”

The drug also showed improvement at six months in fasting glucose, HbA1c, insulin levels and HOMA-IR.

In its prospectus, Cirius indicates it plans to raise $86 million from its IPO. The company was originally called Oceta Therapeutics and was located in Kalamazoo, MI. In 2017, Frazier Healthcare Partners and Denmark-based Novo Holdings threw $40 million at the company, redubbed it Cirius Therapeutics, and moved it to San Diego.

The company indicates it will use its IPO funds to continue clinical testing of its lead compound, as well as for manufacturing of the drug.

Unfortunately, while the government is in shutdown, the IPOs aren’t headed anywhere until it’s over. In order to sell securities, the SEC must review and approve the companies’ plans, and the SEC indicates that with limited staffing, its people are only responding to “emergency situations involving market integrity and investor protection, including law enforcement.”

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