Vir’s aftermarket weakness adds to skittishness for IPO queue

Despite pricing within range, the anti-infective company lost value, compounding concerns for other biotechs

The tepid performances of two high-profile IPOs late in the week added to a widening body of evidence that investors’ demand for new biotech listings has begun to weaken, despite a long queue of companies hoping to get out this year.

Although Vir Biotechnology Inc. (NASDAQ:VIR) priced its IPO within its proposed range late Thursday, the company quickly lost 30% of its value in the aftermarket, slipping $5.98 to $14.02 on Friday and slicing over $650 million from the $2.2 billion valuation its offering price implied. The losses came on a day when biotech indexes and the broader markets were trending upward.

Vir’s listing came one day after BioNTech SE (NASDAQ:BNTX) settled for a post-IPO valuation about $1 billion lower than what the company had recently targeted. BioNTech trimmed its proposed share count by 3.2 million ADSs and slashed its price range earlier in the week before pricing at the bottom end of the revised range for a $3.4 billion valuation. Its ADSs slumped below $14 on Friday, finishing the week about 8% below their $15 IPO price (see “BioNTech Underwhelms”).

Despite the weak aftermarket demand, Vir was able to price at the bottom end of its range, selling 7.1 million shares at $20 to raise $142.9 million at a postmoney valuation of about $2.2 billion. It had hoped to sell that many shares at $20-$22.

Vir is taking an immunological approach to combating infectious diseases. The company’s president and CEO is George Scangos, who was CEO of Biogen Inc. (NASDAQ:BIIB) in 2010-16. Two of its programs, for HBV and influenza, have reached the clinic.

BioNTech’s reduced expectations and uninspiring performance, plus ADC’s failure to list, have provoked worries.

Vir’s IPO gives liquidity to a private syndicate that poured $630.7 million into the company across its three-and-a-half-year life span.

Figures in its prospectus suggest that its original investor, Arch Venture Partners, holds a stake that was worth more than three times its total investment, at the time of pricing. The document says Arch invested $110 million in Vir’s series A round, and then put $50 million into its series B; it holds 25.2% of Vir’s equity following the IPO. Based on Vir’s postmoney valuation, Arch’s stake was worth about $550 million -- or roughly 3.4x the $160 million commitment in the two rounds.

Its second-largest shareholder, Softbank Vision Fund, invested $70 million in the series A and $110 million in the series B. Its 19.8% post-IPO stake was worth about $433 million, or 2.4x the fund’s investment.

The two firms invested more than half of the equity funding Vir raised as a private company. Other shareholders named in the prospectus include the Abu Dhabi Investment Authority, the Alaska Permanent Fund, Baillie Gifford, the Bill & Melinda Gates Foundation and Temasek.

BioNTech’s reduced expectations and uninspiring aftermarket performance, coupled with the failure of ADC Therapeutics S.A. to complete its proposed New York Stock Exchange listing last week, have provoked some worries for a long list of companies in the IPO queue. The pace of new proposed listings has stepped up ahead of anticipated volatility during the 2020 U.S. election year (see “Biotechs Likely to Flood IPO Market”).

Liver disease company 89bio Inc. and diagnostics play Centogene B.V. joined the IPO queue Friday, proposing to raise up to $70 million and $69 million, respectively.

Vir’s underwriters are Goldman Sachs, J.P. Morgan, Cowen and Barclays. Vir has four platforms for developing medicines: one to identify and engineer antibodies from survivors of infections, one using human cytomegalovirus (CMV) as a vector for T cell vaccines, one harnessing the innate immune system, and one using siRNA to inhibit pathogens’ replication.

BioNTech is developing a pipeline that originally consisted of mRNA-based therapeutics, but now also spans CAR Ts and other cell therapies, bispecific antibodies and small molecule immunomodulators. ADC Therapeutics develops antibody-drug conjugates.

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