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IPO Update: Genmab Readies U.S. IPO Effort

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Quick Take

Genmab A/S (GMAB) has filed to raise over $500 million in an IPO of its ADSs, per an F-1/A registration statement.

The company is advancing a pipeline of antibody-centric therapeutic drugs for a variety of cancers.

GMAB is asking investors to pay a 10% premium to its OTC-quoted price. If the stock trades down 10% from that level, I may get interested.

Company and Technology

Copenhagen, Denmark-based Genmab was founded in 1999 to improve the lives of patients with a need for new therapies by developing antibody-based therapeutics. Company management is headed by Jan G. J. van de Winkel, who was previously Vice President and Scientific Director of Medarex Europe.

Genmab has developed the DuoBody technology platform for generating bispecific antibodies and the HexaBody technology platform which creates enhanced effector function antibodies.

Genmab’s lead drug, daratumumab, marketed by Janssen Biotech under the brand Darzalex, is a human IgG1k monoclonal antibody (mAb) with high binding affinity for the CD38 molecule, which is highly expressed on the surface of multiple myeloma (MM) cells. Management claims daratumumab was the first ever human CD38-targeting mAb to reach the market and the first approved mAb by the FDA for the treatment of MM.

Janssen Biotech is conducting a clinical development program of daratumumab for the treatment of smoldering MM, frontline MM, and relapsed/refractory MM, as well as key clinical studies for a subcutaneous formulation.

The company’s main proprietary drug candidate, Tisotumab vedotin, is an antibody-drug conjugate that targets the tissue factor of a protein involved in tumor signaling and angiogenesis, and is currently being evaluated for its safety and efficacy for the treatment of cervical cancer and certain other solid tumors. Tisotumab vedotin is currently being developed by Genmab and Seattle Genetics (SGEN) under an agreement in which both companies share all future costs and profits for the product on a 50:50 basis.

Below is the current status of a portion of the company’s drug development pipeline:



(Source: Company registration statement)

Investors in Genmab include GlaxoSmithKline (GSK), Index Ventures, LODH Immunology Fund, BankInvest Biomedical Venture, Dansk Erhvervsinvestering, and Apax Partners France. (Source: Crunchbase)

Market and Competition

Data from the American Cancer Society puts the lifetime risk of developing multiple myeloma at 1 in 132, or 0.76%, with 32,110 new diagnosed cases anticipated for 2019 in the US alone.

According to a 2016 market research report by Grand View Research, the global multiple myeloma therapeutics market was valued at $7.5 billion in 2015 and is projected to reach $37.5 billion by 2024.

The main factors driving market growth are the constant introduction of newer, more effective therapeutic options and their high adoption rates, as well as increasing disease prevalence due to a rising elderly population. Moreover, the market arrival of pipeline candidates, including monoclonal antibodies and Histone Deacetylase (HDAC) inhibitors, is anticipated to further propel market growth during the period.

Due to failed outcomes of currently available medication for multiple myeloma, there is a high demand for more effective treatment options to offset therapeutic dissatisfaction and an increase in life expectancy of patients.

Newly introduced mAb and HDAC inhibitor drugs are projected to exhibit the fastest growth during the period due to their effectiveness and safety.

Major competitors that provide or are developing treatments include:

  • Celgene (CELG)
  • Bristol-Myers Squibb (BMY)
  • Novartis (NVS)

(Source: Sentieo)

Financial Performance

GMAB’s recent financial results are atypical of IPO-stage biopharma firms due to the revenue from the licensing of its lead antibody, daratumumab.

Below are the company’s results for the past two and ¼ years. (Audited PCAOB for full years)

Total Revenue

Period

Total Revenue

% Variance vs. Prior

To March 31, 2019

$88,651,350

-13.2%

2018

$453,770,550

27.9%

2017

$354,815,400

Operating Profit (Loss)

Period

Operating Profit (Loss)

Operating Margin

To March 31, 2019

$(3,888,600)

-4.4%

2018

$207,042,450

45.6%

2017

$201,625,650

56.8%

Net Income (Loss)

Period

Net Income (Loss)

To March 31, 2019

$10,831,350

2018

$241,795,650

2017

$165,532,650

Cash Flow From Operations

Period

Cash Flow From Operations

To March 31, 2019

$97,079,550

2018

$152,217,900

2017

$238,345,800

As of March 31, 2019, GMAB had $176.5 million in cash and equivalents and $91.1 million in total liabilities.

Its free cash flow for the twelve months ended March 31, 2019, was $170 million.

IPO Details

GMAB intends to sell 27.8 million ADSs representing 2.78 million ordinary shares at an expected price of $18.11 per ADS for gross proceeds of approximately $503 million, not including the sale of customary underwriter options.

Assuming a successful IPO at the midpoint of the proposed price range, the company’s enterprise value at IPO would approximate $11.5 billion.

Excluding effects of underwriter options and private placement shares or restricted stock, if any, the float to outstanding shares ratio will be approximately 4.32%.

Per the firm’s most recent regulatory filing, it plans to use the net proceeds as follows:

approximately $100.0 million to advance tisotumab vedotin to commercialization in recurrent and/or metastatic cervical cancer, to progress tisotumab vedotin in other solid tumor indications and to continue building our commercial capabilities in connection with the potential future approval of tisotumab vedotin; and

approximately $275.0 million to fund drug discovery efforts, to further our development of existing and new technology platforms, and to fund the development of our earlier stage clinical and pre-clinical programs, including:

  • the ongoing development of enapotamab vedotin in various solid tumor indications;
  • the ongoing Phase I/II clinical trial of HexaBody-DR5/DR5 for the treatment of solid tumors;
  • the ongoing Phase I/II clinical trial of DuoBody-CD3xCD20 for the treatment of B-cell malignancies; and
  • the launch and conduct of Phase I/II clinical trials following submission of INDs and/or CTAs in 2019 for DuoBody-PD-L1x4-1BB, DuoBody-CD40x4-1BB and DuoHexaBody-CD37.

Management’s presentation of the company roadshow is available here.

Listed underwriters of the IPO are BofA Merrill Lynch, Morgan Stanley, Jefferies, Guggenheim Securities, RBC Capital Markets, Danske Markets, H.C. Wainwright & Co., and Kempen.

Commentary

Genmab is currently listed on the Nasdaq Copenhagen under the symbol “GEN” and on the US OTC as OTCPK:GMXAY.

Its lead candidate is already approved for marketing, and the firm is atypical of biopharma companies seeking U.S. public capital in that it has significant revenues.

The market opportunities for its various programs are difficult to quantify in the limited space for this analysis.

Management has generated major commercial collaborations, including with Janssen, Seattle Genetics, and others. This is a very strong signal as to the value and potential value of the firm’s approach.

BofA Merrill Lynch is the lead left underwriter, and IPOs led by the firm over the last 12-month period have generated an average return of 32.6% since their IPO. This is a top-tier performance for all major underwriters during the period.

As to valuation, management is asking IPO investors to pay an EV / Revenue multiple of 26. This appears to be a slight valuation premium to the firm’s current OTC-traded stock multiple of 22.77x.

Interested life science investors may find Genmab’s prospects enticing, but given that premium assumption, my opinion on the IPO as it is currently priced at $18.11 is Neutral. If the stock trades at 10% less than that, I may become interested.

Expected IPO pricing date: July 17, 2019.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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