Monday, September 16, 2013

Agios CEO David Schenkein Makes The Case For Early Stage IPOs

If the rest of the year is like spring and summer, we are in for one of the busiest years ever for biotech IPOs.

With four more slated to price this week, we 're wondering if the new hopefuls can gain as much traction as others in this year's class. For example, cell metabolism specialist Agios Pharmaceuticals enjoyed a 74% bump on its debut day in July, the biggest first-day biotech pop since the turn-of-millennium bubble. Its shares are still up 50% since the IPO, and it boasts a valuation of more than $800 million. All without a single clinical candidate. Why?
In his first post-IPO interview, CEO David Schenkein said Agios convinced investors that, once in the clinic with its cancer and rare disease drugs, it could quickly reach proof-of-concept and get to market in as little as four years. Agios pitched its capability to identify the right patient groups for early clinical trials.

“We would not move a targeted agent into the clinic unless we had the ability to identify the right patient population,” said Schenkein. “In Phase I, we are only enrolling patients with the molecular marker. We are not enrolling any patients that don’t have it. Not only will we find out about safety and pharmacokinetics, but we’ll also get a very clear sense of if this drug is likely to work in a patient population.”

It's not a unique pitch. Many biotechs are looking to patient stratification to reduce clinical costs and risk. But investors are obviously willing to bet large on Agios' ability to make good on it, perhaps even start with a Phase I/II trial that establishes safety, dosage and efficacy all at once, which Schenkein said Agios is planning. 

For its IPO strategy, Schenkein said the company had been meeting with Wall Street investors for years. Going public was always the plan. In November 2011, the company closed a $78 million mezzanine round led by Fidelity and two other, undisclosed crossover investors. That was a big turning point.

“When we made that decision to do a crossover round, part of that was we weren’t going to take any more venture money. We got a very significant step-up at that round. It valued the company at that time, after the money was in at about $350 million,” said Schenkein. “It’s fair to say that’s a higher number than venture investors could have offered. That helped set the range of what we were looking for going public.”

(For an in-depth look at the changes in biotech brought on by crossover investments, see this START-UP feature.)

Agios initiated the IPO process this year with a confidential SEC filing on May 23, taking advantage of one of the more widely used provisions of the Jumpstart Our Business Startups (JOBS) Act that President Obama signed into law in April 2012.

About three-quarters of this year's biotechs to go public have filed confidentially first, but Agios has been by far the fastest through the process. It filed its S-1, making its intentions public, on June 10. It then debuted shares on July 24, a 62-day turnaround from its first confidential filing. Schenkein said Agios went faster than normal in order to get out before the typical August lull on Wall Street.

We'll have a lot more on the Agios IPO and others in an upcoming feature in START-UP, plus more here and in our sister publications on the confidential IPO process.

Schenkein will also be a featured speaker at our PSA: The Pharmaceutical Strategy Conference this year (September 23-25 in NYC; Click here for agenda). His talk, as part of our Leadership in Transition series, will focus on piloting the young company through the private-to-public transition. We hope to see some of you there.

Wall St. bull photo by flickr user Christopher Chan // creative commons license

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