Even though Jounce Therapeutics has no human clinical data to report yet, a partnership with Celgene and support from a broad group of investors have made the Cambridge, MA, cancer drug developer a likely IPO candidate for some time now.
Jounce made those intentions clear Friday, filing papers to try for an IPO that would help the company fund its first clinical trial. The question is whether Wall Street investors are willing to bet on its success.
Jounce’s first study involves a cancer drug called JTX-2011. It began this past summer and should produce data next year. Jounce wants to develop drugs that boost the effectiveness of current immunotherapy treatments known as checkpoint inhibitors.
Should Jounce complete the offering, it would trade on the Nasdaq under the ticker “JNCE.” It has set an early goal of raising $75 million.
Using drugs to spur the immune system to fight cancer—what’s known as immuno-oncology—has produced encouraging results in certain cancer types. Four checkpoint inhibitors, from Bristol-Myers Squibb (NYSE: BMY), Merck (NYSE: MRK), and Roche’s Genentech group, have won FDA approval and have started to change how certain cancers of the skin, lung, and other organs are being treated. But checkpoint blockers still only work in a fraction of patients, spurring researchers and companies to test combination therapies that might represent the future of cancer care. Jounce is one of several companies in on the mix-and-match game.
Jounce is developing JTX-2011, for instance, which targets what’s known as inducible T cell co-stimulator, or ICOS, a protein found on the surface of a specific type of T cell that only gets expressed in large quantities when the immune system is activated. Jounce is testing JTX-2011 in an early-stage trial in patients with solid tumors, and believes it might be effective on its own or in tandem with other drugs. Jounce is also developing its own checkpoint blocker, a drug candidate called JTX-4014 that it may test in combination with JTX-2011 or other drugs it develops internally.
Jounce has plenty of well-funded competition. GlaxoSmithKline (NYSE: GSK), for example, also has an anti-ICOS drug, GSK 3359609, that began Phase 1 testing in early 2016. But Jounce does have the support of a big cancer drug maker, Celgene (NASDAQ: CELG), which in July paid Jounce $225 million in cash to get partial rights to JTX-2011 and a few other drug programs. Celgene also bought $36 million in equity and with an 11.4 percent stake is Jounce’s third-largest shareholder. (Third Rock Ventures, which formed Jounce in 2013, holds 53.5 percent of the company’s stock, while Fidelity Investments holds 12.1 percent. Jounce has raised $139 million in equity since inception and had $271 million in cash in hand as of Sept. 30, enough for at least two years of financial runway.)
Biotech IPOs, meanwhile, have slowed from the boom period of 2013 to 2015. But several offerings were still completed in a down year for IPOs, largely due to heavy insider buying. According to an annual review from IPO research firm Renaissance Capital, there were 105 IPOs in 2016 across all industries, down 38 percent from 2015 and the lowest total since 2009. Healthcare remained the most active sector, driven by 40 total IPOs—29 of which were biotechs, according to the report. Renaissance expects biotechs “may need to follow the same playbook” and rely on insider participation in 2017.
Even with insider help, the performance of the 2016 biotech IPO class wasn’t great. According to the Renaissance report, the top two biotech IPOs, performance-wise, were AveXis (NASDAQ: AVXS), which closed 2016 up 138 percent from its $20 IPO price in February; and Novan (NASDAQ: NOVN), which ended the year up 145 percent from its September IPO price. But the worst 2016 IPO performers were mainly small biotechs, among them PhaseRx (NASDAQ: PZRX), Kadmon Holdings (NASDAQ: KDMN), and Oncobiologics (NASDAQ: ONS).