The IPO market has been much more discerning about biotechs in 2016 than it was during the 2013-2015 boom. But Wall Street investors embraced Ra Pharmaceuticals Tuesday evening, enabling the Cambridge, MA-based company to close an even bigger IPO than it had hoped for.
Ra raised close to $92 million in the offering. The company sold 7,049,230 shares—about 1.25 million more than anticipated—at $13 apiece, in line with the $12 to $14 range it set last week. Ra’s haul could increase if its underwriters exercise their right to buy another 1,057,385 shares at the IPO price. The company will begin trading on the Nasdaq Wednesday morning under the ticker symbol “RARX.”
Biotech IPOs have been up and down in 2016. While the window for offerings remains open, many companies have relied on heavy insider buying to complete their IPOs, and a number are trading at or below their IPO prices, according to data from IPO research firm Renaissance Capital.
The latest quarterly review of IPO activity from Renaissance shows that the insider buying trend continued in the third quarter. Most of the 10 healthcare IPOs between July and September were “small biotechs with substantial insider support,” according to the report. And Ra is no exception: insiders expressed interest in buying up to $30 million of Ra’s shares before the offering, or 40 percent of the $75 million it had been hoping to raise before bumping up the offering on Tuesday. (These agreements aren’t binding, but they usually end up being accurate.)
Ra’s most significant shareholders prior to the IPO were New Enterprise Associates (22.09 million shares), Morgenthaler Venture Partners (17.38 million shares), Novartis Bioventures (17.23 million shares), Novo A/S (12.50 million shares), Lightstone Capital, and RA Capital Management (both 8.33 million shares).
Ra is using the cash to develop an experimental drug, RA101495, that it hopes can become a threat to Alexion Pharmaceuticals’s (NASDAQ: ALXN) eculizumab (Soliris). Alexion’s drug is the only approved therapy for two rare blood diseases—paroxysmal nocturnal hemoglobinuria and atypical hemolytic uremic syndrome—and brings in more than $2 billion annually.
Ra is one of several companies (among them Alexion) trying to develop new drugs for PNH, a disease in which the complement system—a part of the immune system—destroys red blood cells, causing a host of problems like blood clots and organ failure. In its prospectus, Ra notes that Alexion’s eculizumab has to be infused bi-weekly at a clinic, and sometimes patients’ symptoms recur anyway. Ra’s drug would be self-administered by patients at home on a more frequent basis (either daily or weekly) via an injection just under the skin. The company believes this could be more convenient for patients, and help them better control their PNH. The first big clinical test of that theory will come next year, when Ra starts a Phase 2 trial in PNH patients. Ra aims to produce data from that study in the second half of 2017.
With the upcoming trial, Ra not only hopes to prove the value of the experimental drug, but also to demonstrate that the drug development platform that produced it can combine some of the best properties of antibodies and small molecule drugs. RA101495 is the first potential product from that platform.”