Just when the markets are sliding against the background of the coronavirus pandemic, Israeli-US cancer treatment company Ayala Pharmaceuticals, based in Rehovot, has filed a draft prospectus for an IPO on Nasdaq. The company seeks to raise $50 million. The company valuation for the purposes of the IPO has not yet been disclosed, but it will presumably be in the hundreds of millions of dollars. The underwriters are Citi, Jefferies, Oppenheimer, and Raymond James.
In comparison with the general stock indices, the Nasdaq Health Care Index (IXHC) has not fallen sharply in recent weeks, but the sharp rises in the stocks of companies developing anti-viral treatments has compensated for falls in the stocks of companies unconnected to that field, in line with the market in general. Nevertheless, five healthcare companies with no connection to coronavirus succeeded in making IPOs in February. Revelations of the spread of coronavirus in the US may affect the trend, but for the time being the IPO window is open.
Ayala Pharmaceuticals was founded by venture capital firms IBF, which owns 35%, and aMoon, which owns 25%, and Harel Insurance Investments and Financial Services Ltd. (TASE: HARL), with 18%. Among the other investors in the company is Japanese-Israeli venture capital firm SBI. The company's CEO is Roni Mamluk and its chairman is David Sidransky, a partner at IBF, which is an indication of Ayala Pharmaceuticals' importance to the firm. The company has so far raised $70 million.
It was founded on the basis of technology originally developed at pharmaceuticals company Bristol-Myers Squibb for treating cancer. Pharmaceuticals companies sometimes spin off products into other companies if they think that a product represents a gamble and that a small team will be able to make faster progress with it. The larger company usually continues to hold a small stake in the startup, as in this case, in order to share the benefit is the product succeeds.
Ayala Pharmaceuticals' last fund-raising round was in May 2019, when it raised $30 million. The round was led by pharmaceuticals company Novartis, which tends to invest in companies of this kind when it believes that collaboration agreements with them may be of interest to it. Under the agreement that it signed with Novartis, Ayala Pharmaceuticals received a further $10 million.
The products that Ayala Pharmaceuticals received from Bristol-Myers Squibb are drugs for treating cancer that expresses a genetic mutation of the Notch type, regardless of the organ affected or the type of cancer. The company is currently examining the product for adenoid cystic carcinoma, a rare cancer that mainly affects the saliva glands. It intends in the future to test the product on breast cancer exhibiting the mutation, which has no cure using existing treatments. Trials in this field are meant to begin shortly.
The agreement with Novartis includes an option for Novartis to use Ayala Pharmaceuticals' technology to develop a product for treating melanoma involving the Notch mutation. This product is not yet in clinical trials.
In 2019, Ayala Pharmaceuticals posted a loss of $17 million, mainly as a result of $14 million expenditure on research and development, as is to be expected of a company at this stage. It had $17 million cash at the end of the year, and its annual cash burn rate was $15 million.
Published by Globes, Israel business news - en.globes.co.il - on March 8, 2020
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