Aduro’s (ADRO) long awaited public debut has arrived. As expected, the hype for immunotherapies spilled over to Aduro as the company priced 7M shares at $17 last night. ADRO stock opened at nearly double that price this morning at $32, or a valuation of $2B. The stock closed at $42, a 145% increase over IPO price.
As of March 31, 2015, Aduro had $133M in cash. In addition to this, the company raised a net $132M from the IPO and a concurrent private placement. This excludes the potential $17.85M that can be raised from underwriter’s over allotment, which is almost guaranteed to be exercised given the initial price surge. Aduro also received an upfront payment of $200M from the collaboration signed with Novartis in March. In total, Aduro’s cash balance is over $480M.
Moreover, investors are raving over Aduro due to the fact that the biotech has signed big pharma collaborations with Novartis and Johnson & Johnson subsidiary Janssen (read more here). In these deals, Aduro received aggregate upfront payments of nearly $250M and a total of $1.6B contingent on future milestones.
Aduro’s Impact on Advaxis
Advaxis (ADXS) is the only other public company in clinical trials that utilizes Listeria-based immunotherapies to trick the immune system into thinking it is attacking bacterial infection rather than the actual cancer cells. In a recent article submitted on TheStreet.com, I discussed the similarities between Aduro and Advaxis. The approaches are so close, in fact, that the two companies have engaged in patent disputes. The European Patent Office sided with Advaxis.
Although the approaches that both companies are taking are similar, there are two main differences:
- Advaxis does not have the same financial backing as Aduro
Similar to Aduro, Advaxis has signed its own big pharma collaborations with Merck and MedImmune, an arm of AstraZeneca. However, Advaxis has given up the conventional financial incentives (upfront + contingent payments) for sole discretion of their compound and the flexibility to negotiate potential agreements down the road. Some investors downplay Advaxis’ collaborations, claiming that large pharmas were not willing to give up upfront payments. Once looking at Advaxis’ financial standing, such claims could be disregarded.
Advaxis reported cash balance of $30.5M as of January 31, 2015. The company received an additional $15.8M in proceeds from a February financing. This leaves Advaxis with roughly $46M in cash, enough to fund operations until Q1 2017. With no financial urgency, Advaxis had no reason to take upfront payments in exchange for equity in their compound.
2.Advaxis trades at 1/5th of Aduro’s valuation
During Aduro’s first trading day, rival Advaxis traded down over 12%. The valuation gap widened as Aduro was up 147%. The coverage that Aduro will receive will act as a marketing tool for Advaxis, making investors realize the similarities in the science and difference in valuation. Due to this, I expect the gap to narrow as more investors flow into Advaxis.