The IPO market is booming, and Autolus Therapeutics appears to be the latest company taking advantage of investors willing to accept more risk. The UK biotech company announced on Tuesday that it had filed with the SEC to go public on the NASDAQ under the label AUTL. Autolus said on its Form F-1 that its maximum offering was $100 million, but this is a preliminary number used to calculate filing fees and we do not know how much the company aims to raise.
Biotech IPOs always carry a fair degree of risk, and Autolus appears to have upsides which minimize risk at first. It has major potential, reliable partners, and possesses good financial numbers which could make it a good investment eventually.
But even that may no longer be enough in this market, and Autolus faces some major downsides. Investors will have to wait see what the share price and valuation will be before making a decision, but it may actually be time to stay away not just from this company, but from cancer drugs in particular.
A New Approach Towards Cancer
In its Form F-1, Autolus declares that it is “developing next-generation programmed T cell therapies for the treatment of cancer.” This therapy is known as the chimeric antigen receptor T-cell treatment or CAR-T treatment and aims at programming a patient’s own T-cells or white blood cells to seek out and destroy cancerous cells. Cancerous cells can normally evade recognition, and CAR-T aims to correct that.
Autolus currently has five clinical-stage programs, each of which aims to use programmed T-cell therapy to target different cancers such as lymphoma and leukemia. It should be noted that all of these treatments are in an early stage of development and will thus not be ready to go on the market for a few years. AUTO1, AUTO2, and AUTO3 are currently undergoing either Phase 1 or Phase 1/2 clinical trials, and there is not a huge amount of data currently available on their efficiency and safety so far.
Launching an IPO with treatments this early in the pipeline is a concern, but this is hardly unusual for biotech IPOs and is not a serious issue most of the time. The problem is that Autolus is far from the only biotech company exploring CAR-T. Swiss biotech company Novartis (NYSE:NVS) received FDA approval for CAR-T drug Kymirah last year, and it received a second approval for a cheaper version of the drug last week. Furthermore, Kymirah sales in the 2018 first quarter were disappointing, attracting controversy over whether doctors will readily use what is an expensive and difficult treatment.
With so many biotech companies out there promising treatments for cancer, they must make more of an effort to distinguish themselves and explain what makes them a particularly attractive investment, because as of right now, it is not Autolus’s products given the early stage of development.
Autolus’s Finances
If Autolus could point to a solid strength, it is its financial situation. Autolus reports that it had $137 million cash on hand as of September 30, 2017 followed by $129 million as of December 31, 2017. Meanwhile, it reported net losses of $12.5 million and $19.7 million in 2016 and 2017 respectively. The company has raised $176 million as of September 30, 2017 thanks to strong investments from backers such as Arix Bioscience, Woodford Investment Management, and Syncona.
Autolus states that “we expect that our existing cash resources will enable us to fund our current operating expenses and capital expenditure requirements for at least the next 12 months,” which does not include what they can raise from the IPO. So while it will take years for this company to get its drugs towards development, this is not a video production company which will be desperately selling more equity in the near future. Another good sign is that Autolus is moving towards leasing and eventually developing manufacturing, indicating that it is taking an aggressive approach.
A Cancer Bubble?
Everyone knows that a biotech company which could develop a successful cancer treatment will have a license to print money, but that demand fuels competition which can be bad for individual businesses. Autolus is not a large company, with only 126 employees as of April 15. Other companies are ahead of it in developing CAR-T treatments. It will take years for its drugs to get past FDA approval if they do at all? So what are the unique competitive strengths which distinguish this company from the numerous companies also seeking to cure cancer? CAR-T will probably do well thanks to the initial IPO glow and its good finances, and it is impossible to definitively say that investors should stay away since we do not know the price nor valuation. But investors should be careful about this company’s long-term potential. There are plenty of other, more solid options in this biotech market.