Give and Take: A Look at Life Sciences IPO Withdrawals

A 2013 study that analyzes IPO withdrawals between 1999 and 2004 found that about 13 percent returned later for a successful IPO, 36 percent turned again to raising capital privately, and 42 percent either merged or were acquired by other companies—another common strategy for biotechs. And about 11 percent filed bankruptcy.

A common business strategy for biotech companies is to use private equity funding into proof-of-concept, sometimes as far as into Phase II clinical trials, then launch an initial public offering (IPO) to take the pipeline product into much larger and more expensive Phase III clinical trials. This varies somewhat from other industries, where they actually have a product on the market and are looking for an infusion of capital to expand their business.

Sometimes, companies file for an IPO, then later withdraw it for various reasons. Often companies don’t cite why they withdrew, probably because the reason is lack of interest on the part of investors leading into the actual listing. A 2013 study that analyzes IPO withdrawals between 1999 and 2004 found that about 13 percent returned later for a successful IPO, 36 percent turned again to raising capital privately, and 42 percent either merged or were acquired by other companies—another common strategy for biotechs. And about 11 percent filed bankruptcy.

Here’s a look at five IPO withdrawals that took place in 2018 in the life sciences space.

Alzheon. Based in Framingham, Mass., Alzheon is a clinical-stage biopharmaceutical company working to develop new therapeutics for Alzheimer’s disease and other neurodegenerative disorders. Alzheon planned an IPO in April 2018, with the goal of raising $80 million, but withdrew that offer. Then, in August 2018, the company filed for another IPO, this one for a more modest $40 million. They withdrew that offer on January 16, 2019.

The company is expected to launch a Phase II clinical trial of ALZ-801 in the first half of 2019. Initially, the company had plans for a pivotal Phase III trial and shifted it over to a Phase IIb trial. Reportedly, the first IPO was withdrawn because the company couldn’t float shares. It’s hard to say if that’s the rationale for withdrawing the second IPO or if the government shutdown is a factor.

The Alzheimer’s market is a very tough nut to crack and has been described as an “unrelenting disaster zone.” From 1998 to 2017 there have been about 146 failed attempts at developing drugs for Alzheimer’s disease, and 2018 was also marked by numerous failures. It’s possible that investors are just scared off by the odds of a small company like Alzheon—which has about six employees—succeeding where so many big players, like Merck, Pfizer, Bayer, Eli Lilly and Company, GlaxoSmithKline and others have failed.

In the most recent filing, withdrawing the IPO, the company indicated it could “undertake a subsequent private offering” for its stock.

SpineEX. Based in Fremont, Calif., SpineEX is a medical device company specializing in innovative and unique solutions related to spinal fusion treatment. On October 10, 2018, the company announced it had received 510(k) clearance from the U.S. Food and Drug Administration (FDA) for its Sagittae lateral lumbar interbody fusion (LLIF) device.

In September 2018, the company filed to sell $17.25 million of common stock. Donovan Jones, writing for Seeking Alpha, commented at the time, “SPIX is a small firm attempting to gain approval for and launch substantially similar products into a market that already has major medical device firms as competitors.”

SpineEX’s prospectus lists those companies as Medtronic, DePuy Synthes, Stryker Corporation, NuVasive, Zimmer Biomet Holding, Globus Medical, Alphatec Holding, Orthofix International, K2M Group Holdings, and RTI Surgical.

On December 21, 2018, the company withdrew its S-1 filing. No reasons for the withdrawal were provided.

Anonymous reviewers listed on suggest there were numerous red flags in the initial filing, including “No revenue (2018), -$1.4M cash burn (mostly G&A, e.g. Salaries)” with the chief executive officer bringing in $300,000 and the chief technical officer bringing in $240,000, and the global business president bringing in $240,000.” The same reviewer noted, “Too many risks to cover, but all pointing to no revenue but extremely high burn rates from G&A for a company with less than 15 people. Too many CxO and executives with no proven experience.”

Another reviewer wrote, “Two of the founders were founders of Medika Therapeutics, which closed without a working product after burning $M investor money.”

There are also multiple online rumors, which have not been verified, that the founders, Roy Chin and Christie Lan Wang, are being investigated for fraud over previous companies.

Abpro Therapeutics. Based in Woburn, Mass., Abpro’s lead product candidate is AB-100 for the treatment of breast, gastric, and endometrial cancers, and ABP-201 for vascular diseases of the eye. According to their website, none of their pipeline products have moved into the clinic yet, but ABP-100 is the furthest along in Investigational New Drug (IND)-enabling studies, as it ABP-201. The company has two proprietary platforms, DiversImmune and MultiMab. DiverseImmune allows the company to generate high affinity, high specificity antibody “building blocks” against a range of therapeutic targets. MultiMab allows them to assemble those building blocks into bi- and multi-specific antibody formats.

The company had filed to for an IPO in April to raise $60 to $69 million by selling 4 million shares at $14 to $16 per share. In May 2018, the company postponed the IPO. In the original prospectus, it said it planned to begin testing ABP-100 in the first half of 2019 in HER2-positive solid tumors.

ABP-100 was licensed from Memorial Sloan-Kettering Cancer Center. Abpro indicated that the antibody had shown “strong and, in some cases, curative antitumor activity in mouse models of HER2+ breast, gastric and endometrial cancer.”

Laster this year, the company had plans to begin trials of ABP-201 in diabetic macular edema (DME).

No reasons were cited for postponing the IPO.

Mereo BioPharma. Headquartered in London, UK, Mereo had plans to raise $80 million with a Nasdaq IPO to take its BPS-804 (setrusumab) for osteogenesis imperfecta (OI) into Phase III clinical trials. The company has backing from Novartis.

However, in April 2018, Mereo withdrew its plans. The company’s chief executive officer, Denise Scots-Knight blamed a “challenging stock market conditions” for the change of plans. That may be, although as FierceBiotech pointed out, that’s undermined by 2018 being a boom year for biotech IPOs.

The withdrawal left Mereo without the cash it needed for broader Phase III development. The company ended 2017 with about $73 million in cash and short-term deposits and investments. With interest not gelling in early 2018, the company might have felt that more data from its Phase IIb trial would garner more support. Data is expected in the second half of 2019.

On December 17, 2018, Mereo announced positive data from the safety extension study of the Phase IIb trial of BGS-649 for hypogonadotropic hypogonadism (HH) in men with a body mass index of over 30. It also plans to present data from that trial at ENDO 2019 in New Orleans in March 2019.

Klockner Pentaplast. Based in Montabaur, Germany, Klockner Pentaplast produces and markets the packaging, films and services for the pharmaceutical, medical device, food, beverage and card markets. On January 16, 2019, the company announced it was investing $25 million to expand its global production capacity for pharma and medical device packaging films at its factory in Louisa County, Virginia. This will result in about 34 new jobs.

The company had plans to list with the New York Stock Exchange, but withdrew the plan on May 14, 2018. The original IPO was filed in December 2016 with a proposed deal to raise $100 million. Renaissance Capital estimated it could have raised as much as $400 million.

The company, in its withdrawal notice, said it planned to focus “on reorganization and integration activities related to a recently completed acquisition.”

Klockner Pentaplast acquired UK-based Linpac in April 2017. The deal closed in July 2017.