Amid coronavirus rally, Israeli biotech taps Wall St.
Companies have or are poised to raise nearly $500 million in initial or secondary offerings
The U.S. stock market is in the midst of a powerful rally, despite the coronavirus and the economic fallout. Inside that rally, tech stocks have been outperformers and biotech stocks have done better still.
That should come as no surprise: In previous crises, like the 2001 dot-com bubble’s burst and the 2008 global financial crisis, biotech was considered a relatively safe haven. The coronavirus pandemic is not only another crisis, but a crisis whose solution is going to come from the pharma and biotech industry. The S&P Biotechnology industry has climbed 50% since the stock market bottomed out in the middle of March.
A rising market also brings rising interest in initial public offerings. Since the start of the year, no less than 29 pharma, biotech and other health-related companies have gone public. Another 16 are planning IPOs in the coming months. But only one of them, Allovir, is developing a treatment that addresses the coronavirus.
Israeli biotech is riding the wave: Fifteen companies have tapped the U.S. stock market or are poised to raise close to a combined $500 million. Three of them are for IPOs. That’s a complete turnaround from last year.
“Over all of 2019 only one Israeli biotech companies issued stock on the Nasdaq. In 2020 we’re witnessing huge demand for biotech companies after two successful offers and a third one on the way. All this while Israeli companies have conducted tens of secondary offerings,” said Eli Malka, a partner in Tel Aviv-based Prometheus Financial Advisory.
The first of the Israelis was Ayala Pharmaceuticals, which went public for trading on the Nasdaq in May. The company, which is developing small molecule therapeutics for patients suffering from rare and aggressive cancers, raised $55 million at a $186 million valuation after the money.
However, since the IPO its shares have dropped 17% from their peak.
The second IPO was Polypid Optimized Therapeutics, which raised $60 million at a $272 million valuation after the money at the end of June. The company, which is developing controlled-release therapies to improve surgical outcomes, had failed to go public two times before. Its shares have treaded water since the IPO.
Ironically, the coronavirus is a double-edged sword for biotech companies, according to Prometheus. “It will be interesting to see developments over the next year in light of the coronavirus, which is likely to make it harder for clinical trials [to] advance quickly due to limits imposed on hospitals and the new FDA directives on the issue issued a the end of March,” the company says in an investor note.
PainReform is next in line. Formed in 2007 by the Ofer family’s XT Hi-Tech venture capital fund, the private equity fund Viola and Medica Venture Partners, the company is focused on reformulations of established pain drugs to prolong and enhance their efficacy and reduce adverse effects.
Its PRF-110, now undergoing clinical trials, is deposited directly into the surgical wound prior to closure and has been shown to provide pain reduction for up to 72 hours. PainReform is planning to raise $25 million, according to Prometheus.
The secondary market has been even more active: Prometheus says 11 Israeli companies have undertaken equity offerings totaling $306 million, with 45% of the money raised for cancer treatments. Prometheus says these secondary offerings on average have been done at about a 5% discount to the company’s traded price, a narrow one that points to the strength of the sector.
The biggest secondary issuers include Compugen, which raised $75 million, Gamida Cell ($60 million), Enlivex (two of $25 million each) and Sol-Gel ($23 million).
Prometheus says the most impressive of all the secondaries was by Kitov Pharma, which is developing therapies to overcome tumor-immune evasion and drug resistance in hard-to-treat cancers. The company has conducted two offerings in recent weeks – one for $10 million at the beginning of May that was followed by a rally that lifted its stock prices to as much as $1.26 and a second of $35 million June 25 at 90 cents. The day before Kitov’s stock had closed at just 76 cents.