Biotechnology initial public offerings are showing sustained signs of life for the first time in two years, and Kyverna Therapeutics’ larger-than-expected raise on Wednesday is the latest example.
The company, a developer of “CAR-T” cell therapies for autoimmune diseases, brought in $319 million, beating its initial projections. The offering is the sector’s fourth richest IPO of the past two years, according to BioPharma Dive data.
Investor interest grew on Thursday. Shares closed at $30 apiece, more than one-third higher than their debut price. Trading didn’t open for several hours because “nobody wanted to sell the stock,” said CEO Peter Maag.
For Kyverna, the offering validates a pivot the company engineered last year, shifting from an unproven cell therapy method it was founded on in 2018 to a program in clinical testing for autoimmune disease, a newly hot area of research for cellular medicines.
“It took us five years to become an overnight success,” said Maag, in an interview hours after the company began trading.
Kyverna’s success hints at what biotech investors are looking for. As of Friday, eight of the last 12 companies to go public have had medicines in Phase 2 testing or later. Seven of those eight raised at least $100 million and five surpassed $250 million, BioPharma Dive data show. So far, their stock prices have mostly held value or climbed higher, too.
That trend shows “you have to have your story straight, you have to be later-stage, and the management team must have a track record of being able to do this,” Maag said.
Still, every spurt of IPO activity during biotech’s recent downturn has proved fleeting. A string of four offerings early last year was followed by a two-month dry spell. A similarly long drought preceded the current uptick.
Kyverna, too, has challenges ahead. Many biotechs to debut with large offerings in recent years have had trouble holding investor interest, or seen their share price crumble after disappointing clinical results. Kyverna also faces competition from other drugmakers, including pharmaceutical giants Novartis and Bristol Myers Squibb.
“In a biotech’s life, not everything always goes up,” Maag said, “and if people don’t understand, they get discouraged very quickly.”
Maag, a longtime healthcare executive who took transplant products provider CareDx public in 2014, spoke with BioPharma Dive about winning investors’ trust in a volatile market. The following conversation has been lightly edited and condensed for clarity.
BIOPHARMA DIVE: What made you decide it was time to go public, especially given how hard it has been for biotechs to get out over the last few years?
PETER MAAG: It’s my second time around. It helps if you know the madness. We started to put this together in September and had this date in mind. It was like landing a plane directly on this date, which always was supposed to be after [the J.P. Morgan Healthcare Conference in January], allowing us to think through what investor receptivity would be and what the key questions were.
It all started at the American College of Rheumatology [meeting last August], where we had a standing room-only symposium. Then there was the last American Society of Hematology meeting, which I would call the ‘non-oncology’ CAR-T meeting. During J.P. Morgan, there was this validation that CAR-T cell therapy going into this very large patient population will be extremely interesting.
So we did get a little bit of tailwind from the markets, but in general, this is Kyverna. It took us five years to become an overnight success.
Why not raise a private round instead?
MAAG: When we did our Series B extension [last August], we saw some of the right investors coming in. It was our next ‘crossover’ financing, in a way. Then there was the question of how we’d finance the company longer-term. I believe in the public markets as being a good judge of things, and we always wanted to IPO with patient data. We’ve been very successful doing that.
There’s intense competition developing cell therapies for autoimmune diseases, including from larger drugmakers. How did you convince investors to bet on Kyverna?
MAAG: Kyverna was founded to bring cell therapy to autoimmune disease. Others are now looking at our data and thinking, ‘We can do that too.’ I think that’s a challenge. I’m not sure that they can, because autoimmune disease is very different than oncology.
Being first and best in class with a unique safety profile has been our positioning. Our [CAR-T] construct has data demonstrating, in an oncology setting, a superior safety profile. So, the mix of clinical data, being first and being able to demonstrate the value that you bring, that’s what’s critical.
Were you surprised to see the demand you received? What is the key to generating that interest?
MAAG: Financings are always bipolar. They’re either a little bit on the tough side or amazing, and this was amazing-times-two. We had tremendous interest from mutual funds. It was 20 times oversubscribed. We couldn’t open [trading] for a long time [Thursday] because nobody wanted to sell the stock. This jump-up in price is a signal we’re doing something right.
When going public, you need to figure out how to maximize demand and who understands your story. In a biotech’s life, not everything always goes up. This is a novel technology and we need to do a lot of learning. It might not work in all patients. There might be subsets of patients. And if people don’t understand, they get discouraged very quickly.
It’s important that you find an investor base where it clicks, and that you have some comfort picking up the phone and saying, ‘Hey, this is what we’re seeing.’
It seems like IPOs are only possible right now for some companies, but not others. Who can get out, and who will struggle?
MAAG: This is the time for companies that have clinical data to go public. If you’re preclinical, this might still be a tough environment to go out. Investors are gravitating to companies that are a little bit more de-risked. They’re also gravitating to management teams that have a track record of getting it done.
If I were on the board of a preclinical company, I would say that this is still a very volatile market. If you can do an internal financing and extend the round, I’m pretty sure there will be a better time yet for biotech. Why not wait until you see the market clearing?
We’ve seen an early uptick in IPO activity this year, though. Is this a sign of a rebound?
MAAG: It’s a company to company thing. When people say, ‘Oh, the window is back open,’ I’d respond that there’s still a lot of selectivity. We’ve seen that in the last few weeks with the IPOs that have happened. This is much better than what people anticipated a year ago. It’s a different environment. But it’s still very selective and skewed towards late-stage, de-risked types of assets.
Kyverna had to reinvent itself. Why did the company pivot away from regulatory T cell therapy and license what’s now its lead program?
MAAG: The Treg program, which was partnered with Gilead, had promise, but it was very, very early. The science has yet to be established. I haven’t seen clinical data that makes me convinced this is the approach just yet, and a lot of companies have tried and failed.
The program we licensed, there was a clear opportunity, with some of the internal and external data published, to execute. Kyverna was able to see that as well, capitalize very quickly and put the clinical trials in place.