Aduro Prices IPO, But Surely It Will Open Higher

April 6, 2015 • Analysis • Tags: ,

Immunotherapy biotech Aduro (ADRO) has set the price for its IPO of 5M shares at $14 – $16. With a cumulative 57.15M shares outstanding, Aduro IPO valuation is a minimum of $800M. Given the craze surrounding immunotherapies, expect Aduro to be listed at the high end of the range ($16/share) and sporting a valuation greater than $900M ($914 to be precise). Keep in mind this is before the company stock even starts trading publicly among common investors.

Why Aduro Should Spike in First Day of Trading

Aduro announced another big pharma deal with Novartis for its preclinical cyclic dinucleotide (CDN) program. Novartis made an upfront payment of $200 million to Aduro and, if all development milestones are met, Aduro is eligible to receive up to an additional aggregate amount of $500 million. This is the third partnership Aduro has signed with big pharma, the first two being with Johnson & Johnson’s subsidiary Jannsen.

Aduro’s public offering could not be coming at a better time. Immunotherapy based oncology stocks are the hottest trend in healthcare. Riding this wave while having two large pharma collaborations as support should make Aduro a favorite among biotech investors.

Advaxis’ Valuation Gap

I’ve explained in prior articles how the excitement from Aduro’s IPO will spillover to rival Advaxis. Both companies utilize Listeria-based immunotherapies to trick the immune system into thinking it is attacking bacterial infection rather than the actual cancer cells. The approaches are so close, in fact, that the two companies have engaged in patent disputes. The European Patent Office sided with Advaxis.

Advaxis continues to built the proof needed to validate it’s investigational Lm-LLO immunotherapy. The company reached an agreement with the Radiation Therapy Oncology Group (RTOG) Foundation to evaluate the safety and efficacy of Advaxis’s lead cancer immunotherapy, ADXS-HPV (ADXS11-001), in a Phase 2/3 anal cancer trial, which will be run by NRG Oncology. Though these sorts of deals don’t have the same appeal that Aduro’s do with big named pharmas and upfront payments, Advaxis believes in the upside of its candidates and does not want to give up asset ownership. This is being discounted by investors and thus leading to the company receiving valuations lagging peers. For investors however, this should be viewed as a bullish sign. Management is confident enough in the company’s upside that it is not willing to sell assets.

Advaxis has already seen some of the hype from Aduro. ADXS is up 25% in the last month primarily because it is the only other Listeria-based immunotherapy, next to Aduro. Yet, for some reason, Advaxis only receives a valuation of $430M; half of Aduro’s expected IPO. Remember, I expect Aduro to see a valuation greater than $1B when it trades publicly. At this time, I would expect Advaxis stock to continue its own uptrend.

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