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Kobel discusses taking a company public during a challenging time in the market.
Pharmaceutical companies are struggling to find investors due to recent market events. Bryan Kobel, CEO of TC BioPharm, spoke to Pharmaceutical Executive about his experience taking the company public earlier this year, along with the new treatments the company is developing.
Pharm Exec: What does it take to successfully go public in the current environment?
Kobel: The public markets have been reeling of late, due to any number of factors. Unknowns and uncertainty always unnerve investors, and this is increasingly an issue as inflation fears are realized, the Russia conflict continues and potentially expands, supply chain challenges continue to be exacerbated with little signs of abating, and tensions rise globally…. just to name a few problems.
But the public market for biotech companies has been a nightmare-scape for some time, with the XBI down 60% or more and roughly one-third of public biotech companies trading below cash. TC BioPharm, among many others, has been living this pain of a public company for the last few months, having completed our initial public offering (IPO) on Nasdaq in the first week of February 2022. The most discouraging part of this arduous process was the stark realization that the concerns and headwinds had very little if anything to do with us as a company.
We did learn a few things along the way. While there’s not a single path or a defined roadmap to completing a public listing in today’s market, there are some factors under your control as a company.
Possibly the most obvious is to have a very clear understanding with your underwriter of your minimum thresholds for pricing and size. You need to define what a successful IPO is to you, because that word successful can be very subjective. With certainty, investors will want long runways and will pressure your valuation. In an uncertain market, they will want assurances you have enough cash to reach inflection points and will also be aware that they hold all the cards. A biotech’s ability to weather the current storm to get to multiple inflection points is paramount to its success, and in turn investor returns, so the size of the offering should be appropriate to give cushion to delays as well.
While your valuation will certainly be defensible and backed by any number of analyst modelling and measurement compared to your peer group, market conditions will almost certainly lead to some haircut in your initial efforts. Understanding where your absolute floor is from a dilution perspective and having articulated that clearly to your underwriters will give them solid supporting points in discussions and avoid potential miscommunication.
Having your existing investors as anchors to the IPO, when in reason and if you’re afforded such a luxury, will absolutely benefit you in these valuation discussions. The more backing you have, the less you must give to new investors in negotiations.
Pharm Exec: How can pharmaceutical companies stand out to investors?
Kobel: Make sure your messaging is clear, concise, and timely. Not all biotechs are created equally, and not all biotech verticals or markets receive the same treatment. Cell therapy is squarely in focus on any number of fronts, but gene editing, NK cells, gamma delta t-cells, and other immunotherapy-type companies are in the news almost daily. Being able to cut through that noise to provide investors with a reason to see upside in your company will be the driving force for their investment. How are you differentiated? Why should we invest here, now?
I’m using cell therapy as an example, but this goes for your particular indications as well, be it oncology, viral disease, cardiovascular, etc. We all know how crowded the biotech space is, imagine trying to sift through companies and find the 10% that will be successful, and doing it in a market that is being decimated. You need to give investors a story that stands out, both because your technology is sound from a science premise and because they can see a clear path to value inflection in a relatively near term.
Find as many ports in the storm as you can. Leave no stone unturned. The IPO market is shifting due to the last 18 months, and funds are underwater and facing a difficult climb back. Therefore, you and your underwriter need to widen the net of investors; whether that’s through a larger-scale effort on the capital markets desk or bringing on additional underwriters is up to you, but it will be a necessity for a successful listing.
Lastly, don’t take it personally. Understand that this capital will be painful, you’re likely not going to get the valuation you’re seeking, and it’s likely going to be a trek. That’s OK. What matters is you strengthen your balance sheet to move your asset through the clinical milestones ahead and put your company in a position to pursue your end goal with vigor. Once your company is public, you control your fate and can access the capital markets again if it’s truly necessary. But with 24 months of cash, you can keep your nose to the grindstone, keep your head down in the clinic in your research and development efforts, and you will come out the other side of this market the better for it.
Pharm Exec: What are the benefits of using cell therapy products to treat various forms of cancer?
Kobel: Cell therapy has certainly been a bright spot from a news and data perspective recently. The benefits of cell therapy are still being explored, and there is a lot to learn about the treatments—how efficacious they can be, how broad of a patient population they can treat, where and when in the treatment they are best used, and on and on. But certainly, these treatments will be a part of the treatment paradigm and will be beneficial to patients in one form or another.
Looking at many of the recent announcements in the NK and gamma-delta space, for example, we are seeing the prime reason cell therapies offer so much promise. These therapies provide not only a strong, efficacious therapeutic benefit to patients, but they seem to provide this benefit with very little toxicity. Harnessing the immune system, or duplicating or reproducing its efforts, is extremely tricky but also should have impacts across biotech. With cell therapies potentially avoiding toxic approaches, and depending on the cell therapy, potentially being applicable across very broad swathes of cancer types, we are able to open up the patient population while also providing an economic benefit.
Many companies are looking at allogeneic cell types, meaning a very reproducible product at potentially a fraction of the cost. And with little to no toxicity, the cost goes lower to avoid expensive hospital care. It’s an incredibly exciting vertical. Companies like Imcheck Therapeutics, Nkarta, Adicet, and many others have all shown that in difficult indications, cell therapy can provide a patient benefit.
Initially, many of the cell therapy companies targeted blood-related cancers, following in the footsteps of the CAR-T companies as forefathers of the cell therapy movement. Now we are seeing them branch out aggressively into solid tumors as the efficacy data rolls in, especially the gamma-delta companies and the NK cell companies. Several of these companies are using modified cells, specifically CARs, to enhance the cell therapy in their indication of choice and can do so while still showing very little of the previously associated toxicity with CAR technologies.
Pharm Exec: How is this impacting the future of cancer treatment?
Kobel: As these cell therapies advance in the clinic and we learn more about them, the long-term value to the patient will become more defined. Today, we can certainly take a view of some of the potential benefits. The immediate benefit is the obvious one of a higher/same efficacy with little to no toxicity. This means patients can receive life-changing and life-saving treatments, while not necessarily sacrificing as much of their quality of life as is relatively normal today.
Additionally, there’s potential for many of these therapies to work in conjunction or combination with one another or other treatments. Depending on the approach, many of these cell therapies should lack drug-on-drug interaction with other treatments or could work in conjunction with each other, similar to how the immune system operates naturally. This move back to a more natural state also allows for the exciting opportunity to provide repeat dosing, and with such a low toxicity profile, these treatments provide the opportunity to pursue repeat treatments for difficult-to-treat or fast-moving diseases, moving them to chronic and manageable states.
As mentioned, these approaches also have the potential to democratize treatments. Many current therapeutics can only treat a percentage of patients or are so expensive for various reasons that there is largely an underserved patient population for the economically disadvantaged or uninsured. Cell therapy provides a potential path for these patients to receive treatment without a heavy economic burden upfront and without potential long-term economic impacts.
All of these benefits will be parsed out as we see more and more data come to fruition. Nothing will be simple or perfect, but the future is very bright in the cell therapy world, and TC BioPharm certainly looks forward to playing our role alongside our colleagues.
Pharm Exec: How have the events in the market over the past 12 months impacted the future of the biopharma industry?
Kobel: One of the potential hurdles being faced today is the lasting impact the COVID-19 pandemic is having on the industry or the ripple effects the pandemic has had in biotech. Regulatory delays abound, which is not to cast dispersions or blame. The FDA is under strain with a massive backlog from trials delayed from COVID, both from IND submissions to start to data that’s been submitted in completion. These were and are never easy documents or details to review, but coupled with staffing issues and the overabundance of submittals, it’s understandable these delays would pile up.
Enrolling patients, or even starting trials, is also proving to be challenging. As more and more clinics and hospital systems lose staff coinciding with an increase in patients, not just due to COVID but people who delayed treatment for some medical non-emergency during the pandemic, clinical trials are proving extremely difficult to staff. The immediate need for these clinics and hospital systems is to treat existing patients in their clinics. While the trials all provide promise and are exciting for the clinics, the reality is there are only so may hours in the day for nurses and pharmacy staff and others.
With more and more clinical trials coming online, this problem may be exacerbated before it’s alleviated. There is a natural ebb and flow, and while these delays are tied to the pandemic, the industry is already finding ways to solve for problems and work more in conjunction with each other to serve patients.