Finance

Partnerships paved the way to a Tokyo IPO for Modalis 

How gene modulation play Modalis charted path to IPO in Japan through platform partnerships 

Gene modulation company Modalis charted its path to an IPO in Japan through early platform partnerships.

Modalis paved its way to a public listing on the Tokyo Stock Exchange’s Mothers through a series of early pharma partnerships leveraging its CRISPR-based gene modulation platform.

Shares of Modalis Therapeutics Corp. (Tokyo:4883) have gained ¥2,435 (203%) since it began trading on Aug. 3, giving the company a market cap of ¥98.9 billion ($929.5 million). Modalis raised ¥3.7 billion ($35.2 million) in its IPO via the sale of 3.1 million shares at ¥1,200, the top of its proposed range. 

Biotechs are a rarity on Mothers; the last to list was regenerative medicine play StemRIM Inc. (Tokyo:4599), which raised ¥9.7 billion in an IPO last August through the sale of 9.7 million shares at ¥1,000. The company is trading at ¥896, 10% below its IPO price.

Before that was Delta-Fly Pharma Inc., which made its public debut in September 2018. At the time of Delta-Fly’s listing, Shigeru Yasue of Mitsubishi UFJ, one of the cancer company’s underwriters, told BioCentury the “de facto standard” for biotechs looking to list on Mothers includes clinical proof of concept and a large pharma partnership; Delta-Fly had met both criteria (see “Flying Delta in Japan”). 

Delta-Fly closed Monday at ¥2,149, down 55% from its list price of ¥4,770. 

Modalis President, Chairman and CEO Haru Morita told BioCentury that profitability is another path to a Mothers listing for a biotech. “We are a profitable company, and that allowed us to go public,” he said. 

Following a series of licensing deals, Modalis became profitable at YE19, posting ¥140.5 million in net profit.

“Obviously this favors companies that have technology platforms where you can do lots of deals for different targets,” said Joe McCracken, a board member who previously served as global head of business development and licensing at Roche (SIX:ROG; OTCQX:RHHBY).

Modalis is using its CRISPR-based guide nucleotide-directed modulation (CRISPR-GNDM) platform to develop rare disease therapies that modulate rather than cleave the target gene. 

Morita said the company is establishing its niche in indications that are not amenable to gene therapy, gene editing or nucleic acid therapies, such as gain-of-function mutations in non-liver cells. 

He noted that while loss-of-function mutations “can easily be targeted by regular gene therapy by bringing the missing gene into the cell” and siRNA or antisense oligonucleotides that naturally home to the liver can be used for gain-of-function mutations, “for non-liver cells we can silence the gene more efficiently.” 

Morita added that Modalis’ approach could also address mutations that are too diverse to be precisely targeted by gene editing therapies. 

Modalis first entered a research collaboration with Astellas Pharma Inc. (Tokyo:4503), and subsequently agreed to grant the pharma an exclusive license to MDL-201 and MDL-202, which are in IND-enabling studies for undisclosed muscle indications. Modalis is eligible for $350 million in milestones for the two products; further financial details are not disclosed.

The biotech is also partnered with Astellas on two earlier stage CNS programs — MDL-204 and MDL-206 —  and with Eisai Co. Ltd. (Tokyo:4523) under a November 2019 deal for CNS candidate MDL-205. Deal terms and details regarding targets and indications are not disclosed. 

Modalis also has two internal programs: MDL-101, which is in preclinical testing to treat merosin-deficient congenital muscular dystrophy type 1A, and MDL-102, which is in discovery for an undisclosed CNS disorder. 

The company has rights to IP covering its technology from Editas Medicine Inc. (NASDAQ:EDIT) and the University of Tokyo. 

Mizuho was the lead underwriter of the IPO, joined by SBI Securities Co. Ltd., SMBC Nikko, Ichiyoshi, and Ace.