Last week Zentalis Pharma (ZNTL) raised $165M by pricing their deal at the high end of the range at $18. It finished the week at $23.20 with a market value of over $800M.
This was accomplished with the CEO working out of his kid’s bedroom which he said was “the quietest place in the house” to get this done. No doubt he did this many times and had 1-1 sessions with institutions. But he didn’t have to do the normal crisscrossing of the US (and sometimes Europe) to get a deal done.
The market remains dicey and likely to fall further before it stabilizes. However we have another biotech deal on the calendar for this week. If this deal is a success it may embolden others to try this approach. From what we learned the real story in looking at this deal is the collaboration agreement between Keros and Novo Nordisk (NVO). With that icing on the cake this deal should get done.
This Week
Keros Therapeutics (KROS) - This small biotech has three compounds in development for treating blood-based diseases and bone loss. The deal is 5M shares with a $14-16 range for a size of $75M and a $285M market value at the mid-point.
Keros focuses on a specific family of proteins (TGF-β) that are involved in the development of blood cells, muscles and bone. Their strategy is to leverage their expertise in developing product candidates around these pathways including commercialization of their current lead compounds.There are plenty of applications for these compounds in the blood (anemia) and bone (osteoporosis).
As with most companies now they have added an important “recent development” from the impact of COVID-19 which is expected to have a major impact on clinical trials going forward. I continue to marvel at the number of risk factors facing companies outside of the “obvious” there are 60 pages of them in the S-1 filing.
The company does have a research collaboration and exclusive license agreement with Novo Nordisk around the discovery and development of “Ligand Traps” which might lead to the development of a new compound. Keros received an upfront payment of $16M and then $2M per year over the 2 year period. There are also $96M of potential milestone payments in six different chunks for the first compound. There’s also a second set of similar milestones that would apply to a second or third licensed product that total $80M. On top of that there are sales milestone payments that could reach $70M and royalties. The sum of these *potential* milestone payments exceeds the proposed market value by quite a bit. It’s hard to put probabilities on it given that they are only in "research mode” but it puts a pretty high independent value on the work that the company is doing.
For reference Novo Nordisk is an $18B revenue, $140B market cap pharma.
That might just be enough to get this deal done in a market that is in turmoil.
Next Week
There isn’t anything on the calendar for next week.
New Filings
One small deal was filed last week - Harbor Custom Development (HCD) is a small real estate developer in the Puget Sound region of Washington. Basically they build those single family home communities that the suburbs are so famous for. It will be a small deal but pricing and other information isn’t available yet.
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