Pharmaceutical and biotech IPOs have been leading the way for the past couple of years, driven by strong investor demand. So far, that momentum has not carried over into 2019.
For instance, prior to KLDO's poor pricing, a couple weeks ago we saw Stealth BioTherapeutics (MITO), Avedro (AVDRO), and Hoth Therapeutics (HOTH) each price at the low end of expectations. The government shutdown and macroeconomic uncertainty that plagued the markets put a lid on the IPO market as a whole. Even when conditions were less than ideal, healthcare related IPOs still seemed to generate solid demand last year and in 2017.
Whether this is just a short-term blip, or, something more lasting remains to be seen.
KLDO's IPO had strong underwriters, including Goldman Sachs, Morgan Stanley, and JP Morgan. So, neither the quality of underwriters, nor stock market conditions can be blamed for the weak pricing here, adding more credence to the idea that healthcare IPOs are losing some steam.
The stock is set to open for trading later this morning on the Nasdaq.
KLDO is a clinical-stage healthcare company focused on leveraging the potential of the microbiome organ to treat disease and improve human health. It has built a human-centric proprietary product platform for discovery and development that it believes will enable the rapid advancement of a portfolio of product candidates into non-IND human clinical studies under regulations supporting research with food.
KLDO's product candidates are Microbiome Metabolic Therapies (MMTs) which are designed to modulate the metabolic output and profile of the microbiome by driving the function and distribution of the organ’s existing microbes. The company believes its MMTs have the potential to be novel treatments across a variety of diseases and conditions.
Utilizing its proprietary product platform, KLDO has created a library of more than 1,000 MMT candidates to probe the structure-activity relationships of its MMTs and the microbiome organ. Its MMT library is rapidly growing as it continues to invest in techniques and technologies for chemical synthesis.
In less than one year, KLDO advanced its lead program from a mechanistic hypothesis to dosing in non-IND human clinical studies. Furthermore, it plans to initiate its first Phase 2 clinical trial under an IND approximately two years after conducting its first ex vivo screening.
KLDO's initial programs target hyperammonemia, a metabolic condition generally characterized by elevated levels of ammonia in the blood. The company's hyperammonemia programs are focused on two specific diseases, urea cycle disorders (UCD) and hepatic encephalopathy (HE). UCD is a serious and life-threatening, inherited, rare genetic disease arising from congenital mutations that affect the enzymes of the urea cycle, resulting in an impaired ability to process ammonia. HE is a spectrum of neurological and psychiatric abnormalities generally seen in patients with liver failure.
The company has selected KB195 as its lead product candidate for development in the potential treatment of hyperammonemia in patients with UCD. It has conducted a non-IND human clinical study with KB195 in healthy volunteers and has initiated a non-IND human clinical study in UCD patients. KLDO also has a cleared IND for KB195 in UCD and is advancing directly into a Phase 2 clinical trial planned for the first half of 2019.
As a clinical stage company, KLDO has not generated any revenue yet. For FY18, it had an operating loss of ($61) mln as R&D expense more than doubled yr/yr to $42 mln. The increase in R&D expense is related to its KB195 program due to costs incurred with external CROs, external CMOs, and IND-enablement costs associated with its preclinical and clinical development activities of KB195 for hyperammonemia.
Based on its current operating plan, KLDO believes that the net proceeds from this offering, together with the existing cash, cash equivalents, will enable it to fund its operating expenses, capital expenditure requirements and debt service obligations through the second half of 2020.