Eleven Prices IPO Below Projected Range, Grabs $50M

2/6/14Follow @benthefidler

Eleven Biotherapeutics wants to prove that a drug it’s developing can go toe to toe with Allergan’s big-selling dry eye disease drug, Restasis. Wall Street, however, was tepid about the Cambridge, MA-based startup’s prospects to do so.

Eleven has priced its IPO, selling 5 million shares to public investors at $10 apiece, raising a total of $50 million before discounts due to underwriters. The price comes in well below Eleven’s projected range of $13 to $15 per share. The startup also upsized its offering from the original 4.3 million shares. It’ll begin trading on the Nasdaq today under the ticker symbol “EBIO.”

Citigroup Global Markets, Cowen and Co., and Leerink Partners underwrote the IPO and have a 30-day option to buy another 750,000 shares of stock at the offering price.

Eleven raised about $54 million in equity financing since its inception, according to its prospectus. Third Rock Ventures held 41.3 percent of the company’s stock prior to the IPO, making it Eleven’s largest shareholder. Flagship Ventures (28.8 percent) and JAFCO (18.4 percent) also held big stakes before the offering.

Eleven was founded in 2010 by Third Rock and Flagship, based around the idea of custom designing protein drugs from scratch to possess certain characteristics, like the ability to carry out a specific action on their specific biological target. Eleven initially planned to use that approach to form a portfolio of drugs that it could either develop on its own or advance through partnerships with pharmaceutical companies before they were tested in clinical trials.

Along the way, however, Eleven shifted its focus. The company hired biotech veteran Abbie Celniker as its CEO in 2011. It then latched on to its lead drug, EBI-005, an experimental treatment for dry eye disease, and morphed into an ophthalmic drug company, using its protein engineering roots to develop protein drugs for eye diseases, while supplementing its research with cash from selective engineering partnerships. Eleven cut a drug development deal with Belgium-based ThromboGenics in May, for example, that gave it $1.75 million up front. It stands to potentially receive another $25 million in various milestone payments, as well as some royalties, depending on the success of the drug candidates created through the deal.

Now that Eleven’s gone public, however, the attention is turning squarely to EBI-005. The drug candidate is an eye drop that’s supposed to block two types of interleukin-1 (IL-1) receptors that are implicated in the pain and inflammation associated with dry eye disease. Eleven believes this type of dual-action approach could separate EBI-005 from Allergan’s (NYSE: AGN) Restasis, the standard of care for dry eye disease.

Still, Eleven has much to prove to back that up. The company completed a couple small trials in 2013 that contained elements of both early and mid-stage clinical trials, and says that those studies support its decision to move EBI-005 straight into the deep end of the pool: two separate Phase III clinical trials testing the drug in patients with moderate to severe dry eye disease. It’ll use the IPO cash to run those trials, as well as a mid-stage study of EBI-005 in allergic conjunctivitis (pink eye).

Eleven expects to produce top-line data from the Phase III trials of EBI-005 in early 2015. The company also has some preclinical drug candidates it’s developing for other eye disorders such as diabetic macular edema.

Ben Fidler is Xconomy's Deputy Biotechnology Editor. You can e-mail him at bfidler@xconomy.com Follow @benthefidler

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