From a market perspective this is playing out very much like what happened in 2008/9 - at least so far. Major shocks take time to recover from so we will be measuring this in at least weeks, if not months.
There was already one small deal priced this week and another is scheduled for tonight. We’ll go into some detail here since the calendar is so light. Filings have continued as well so when markets finally do recover there are a growing number of deals waiting in the wings.
If some deals get done without a physical roadshow we wonder if this is something that might “stick” in a post-crisis scenario. If more people work from home maybe doing large lunch presentations in different cities and grueling days of stacked one-on-one meetings won’t be necessary. A man can dream.
This Week
Zentalis Pharma (ZNTL) - The CEO gives the presentation from his kid’s bedroom but this is a pretty high quality deal led by Morgan Stanley, Jefferies and Leerink. The company is has developed some small molecule drug candidates for treating cancer. Although we have tended to avoid the “yet another additional drug to take in combination with existing treatments for cancer” space there are some things to like here.
Zentalis is focusing on proven pathways that target cancers and using medicinal chemistry and their tuned discovery process to generate small molecules that have strong pre-clinical data to support their potential.
It’s an efficient approach which has allowed the company to reach 3 active IND filings in less than three years with two more planned in the next year.
The data presented for the lead drug candidates definitely shows promising results including in the treatments for breast cancer and solid tumors. Again these are expensive combination therapies but they are still needed.
With $162M already invested and at least 3 active compounds in clinical trials the proposed market cap of $580M is fairly small.
The deal is scheduled to price tonight with a range of $16-18 and trade tomorrow morning. One significant additional risk factor is that many clinical trials are being delayed due to the current healthcare turmoil. That could push some of the projected milestones back a quarter or two.
One small deal already priced this week - WiMi Hologram (WIMI) is an advertising-based company in China. They priced a small $26M offering at the low-end of the range at $5.50 where it has remained. At first we thought that maybe the holographic nature of what they do would be more differentiated but it seems to have ended up being just another online advertising tool. On the plus side they do appear to be very profitable. The valuation is close to 8x sales.
Next Week
Keros Therapeutics (KROS) - Another small biotech aims to price their deal next week. They have at least three compounds in development for treating blood-based diseases and bone loss. We’ll have more on this one once we see the roadshow. Jefferies and Leerink are offering this one. The range is $14-16 with a ~$300M market cap.
New Filings
A company we’ve been on the lookout for, GAN (GAN) filed an S-1 last week to list in the US. They are currently traded on the LSE. This is an online betting/gambling software which has become a very hot area in the US with most states legalizing sports betting. Investors have bid up the shares of SPAC Diamond Eagle Acquisition (DEAC) because they are combining with DraftKings to be listed. We’ve done some work on that one which we’ll share once the merger is completed.
The Candyman
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