IPO Report: Aduro Biotech (ADRO)

Francis Gaskins |

Aduro Biotech (ADRO) is a clinical-stage immuno-oncology company focused on the development of first-in-class technology platforms designed to stimulate robust and durable immune responses against cancer. It is headquartered in Berkeley, CA.

Six other companies are scheduled for the week of April 13.  The full IPO calendar is available at IPO Premium.

Manager, Joint-managers: BofA Merrill Lynch, Leerink Partners
Co-managers: William Blair, Canaccord Genuity

ADRO scheduled a $75 million IPO with a market capitalization of $857 million at a price range midpoint of $15 for Thursday, April 16, 2015 on Nasdaq.  Upsized to $119 million, price increased to $17, no change in rating, scheduled for Wednesday, April 15, 2015

SEC filings

ADRO IPO Overview

ADRO is a clinical-stage immuno-oncology company focused on the development of first-in-class technology platforms designed to stimulate robust and durable immune responses against cancer.

ADRO’s lead product candidate is in a randomized controlled Phase 2b clinical trial in metastatic pancreatic cancer.

Immuno-oncology encompasses a class of therapies that leverage the patient’s immune system to slow the growth and spread of, or eliminate, tumor cells.

ADRO Valuation

Glossary

Accumulated deficit (mm)

.

.

-$62

     

Per share dilution

.

.

-$12.02

     

--------------------

         

Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

Aduro Biotech (ADRO)

$857

63.9

-50.4

5.0

5.0

9%

             

Conclusion on Aduro IPO

Buy

Clinical-stage immuno-oncology

Strategic partners include Janssen Biotech & Novartis

Novartis (NVS) may buy $25mm in a concurrent private placement

Shareholders may buy 56% of IPO

Price-to-collaboration  rev:  64

P/E -50, indicating relatively low cash burn rate relative to market cap

Price-to-book: 5

Shareholders may buy $42.5mm in IPO stock, 57% of the IPO

Johnson & Johnson Development Corporation, an existing stockholder, has indicated an interest in purchasing up to $30.0 million of shares of common stock in this offering at the initial public offering price.

Other shareholders & affiliates may purchase $12.5 million.

In addition, Novartis Institutes for BioMedical Research, Inc., an existing stockholder and an affiliate of Novartis Pharmaceuticals Corporation (NVS), a collaboration partner, has entered into a stock purchase agreement to purchase $25.0 million in a concurrent private placement.  NVS has a market cap of $271 billion.

ADRO Business

ADRO is a clinical-stage immuno-oncology company focused on the development of first-in-class technology platforms designed to stimulate robust and durable immune responses against cancer.

ADRO’s lead product candidate is in a randomized controlled Phase 2b clinical trial in metastatic pancreatic cancer.

Immuno-oncology encompasses a class of therapies that leverage the patient’s immune system to slow the growth and spread of, or eliminate, tumor cells.

ADRO believes a critical distinguishing factor in its approach to immuno-oncology is that ADRO’s novel therapies initiate powerful innate immune responses and drive targeted, durable adaptive immune responses.

Another key attribute of ADRO’s approach to immuno-oncology is the versatility of its technology platforms to generate customized and combinable therapies to target a wide range of cancers.

Two proprietary technology platforms

ADRO’s pipeline of immuno-oncology product candidates is derived from two proprietary technology platforms: Live, Attenuated, Double-Deleted, or LADD, Listeria monocytogenes and cyclic dinucleotides, or CDNs.

ADRO’s lead LADD product candidate, CRS-207, is currently being developed in metastatic pancreatic cancer and unresectable malignant pleural mesothelioma.

Phase 2b clinical trial

ADRO's most advanced immuno-oncology regimen, currently in a randomized controlled Phase 2b clinical trial known as ECLIPSE, assesses the combination of the lead LADD product candidate, CRS-207, with GVAX Pancreas to treat late-stage metastatic pancreatic cancer patients who have received at least one prior line of therapy.

GVAX Pancreas is an important synergistic combination candidate because it is designed to induce T cells against an array of pancreatic cancer antigens and enable a broad-based immune response and has demonstrated a favorable safety profile in clinical trials to date.

ADRO expects to report top line results from ECLIPSE in the first half of 2016.

In addition, ADRO is evaluating CRS-207 in combination with chemotherapy in unresectable malignant pleural mesothelioma and has a planned study of CRS-207 in combination with GVAX Pancreas and an anti-PD-1 checkpoint inhibitor in metastatic pancreatic cancer.

ADRO also has ongoing and planned clinical development programs evaluating LADD regimens for glioblastoma multiforme and ovarian cancer, and collaborations with Janssen for lung and prostate cancers.

Improved overall survival

In a completed randomized controlled Phase 2a clinical trial in metastatic pancreatic cancer patients, CRS-207 demonstrated a statistically significant improvement in overall survival when combined with GVAX Pancreas, a cellular vaccine product candidate.

The 93-patient two-arm Phase 2a clinical trial was designed to compare the combination of CRS-207 and GVAX Pancreas versus GVAX Pancreas alone.

The trial met the primary efficacy endpoint of overall survival at an interim analysis and was stopped upon recommendation from the Data Monitoring Committee.

Breakthrough Therapy designation

Based on the data from this study, ADRO’s lead immuno-oncology regimen of CRS-207 and GVAX Pancreas was granted Breakthrough Therapy designation by the U.S. Food and Drug Administration, or FDA.

Breakthrough Therapy designation is intended to expedite the development and review of products that treat serious or life-threatening conditions.

Orphan drug designations

ADRO has obtained orphan drug designations from the FDA for CRS-207 and GVAX Pancreas for the treatment of pancreatic cancer and for CRS-207 for the treatment of mesothelioma.

Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug or biologic intended to treat a rare disease or condition.

Orphan drug designation entitles a party to certain financial incentives and can provide limited market exclusivity in certain circumstances.

Product pipeline
ADRO is developing a pipeline of proprietary product candidates, including two product candidates in collaboration with Janssen Biotech, Inc., or Janssen, targeting prostate and lung cancers.

In addition, ADRO established a worldwide collaboration with Novartis Pharmaceuticals Corporation, or Novatis, for CDN product candidates in oncology.

ADRO has intellectual property protection on both of its technology platforms and each of its product candidates, which ADRO believes it will maintain into the 2030s.

Aduro's Intellectual property

ADRO owns eleven issued U.S. patents, seven pending U.S. patent applications, and corresponding foreign issued patents and patent applications, and additionally ADRO is the exclusive licensee to families of patents and patent applications, all relating to ADRO’s LADD technology platform.

The issued U.S. patents that ADRO owns expire between 2022 and 2027, not including any patent term extensions that may be available under U.S. laws.

The patents and patent applications, if issued, cover attenuated Listeria strains that have deleted or disrupted genomic actA and inlB virulence genes in conjunction with the expression of non-Listeria polypeptides, as well as to Listeria strains that are engineered to express non-Listeria polypeptides, including cancer antigens or fragments thereof.

Competition

The biotechnology and pharmaceutical industries, and the immuno-oncology subsector, are characterized by rapid evolution of technologies, fierce competition and strong defense of intellectual property.

A wide variety of institutions, including large pharmaceutical companies, specialty biotechnology companies, academic research departments and public and private research institutions, are actively developing potentially competitive products and technologies.

ADRO faces substantial competition from biotechnology and pharmaceutical companies developing products in immuno-oncology and in its lead indications. They generally fall within the following categories:

diversified immuno-oncology: AstraZeneca PLC, Bristol-Myers Squibb Company, GlaxoSmithKline plc, Merck & Co., Inc., Novartis AG, Pfizer Inc., Roche Holding Ltd and Sanofi SA;

immuno-oncology aimed at stimulating immune response: AdaptImmune LLC, Idera Pharmaceuticals, Inc., Immune Design Corp. and NewLink Genetic Corporation;

Listeria-based technology: Advaxis, Inc.;

pancreatic cancer: Celgene Corporation, Incyte Corporation and Merrimack Pharmaceuticals, Inc.; and

mesothelioma: Verastem, Inc.

5% shareholders pre-IPO

Morningside Venture (VI) Investments Limited and Ultimate Keen Limited             47%

John E. and Lois A. Rogers       12.1%

Entities affiliated with Fidelity Investments          7.6%

Johnson & Johnson Development Corporation   6.3%

Dividends

No dividends are planned

Use of proceeds

ADRO expects to receive $67 million from its IPO and use it for the following:

$15 million to complete its ongoing ECLIPSE and STELLAR Phase 2b clinical trials in pancreatic cancer;

 $40 million to advance the development of CRS-207 in additional indications, including planned Phase 2 clinical trials in mesothelioma and ovarian cancer;

 $35 million to manufacture CRS-207 and GVAX Pancreas at commercial scale in preparation for potential regulatory approval;

 $30 million for other research and development programs involving its LADD and CDN platforms, including ADU-S100; and

the remainder for general corporate and working capital purposes.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
ADRO Aduro Biotech Inc. 11.50 -0.40 -3.36 292,868

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