IPO Alert: Bristol-Myers-Backed Pharma Stock Could Gain Traction

There is about to be a new biopharma stock on the block. Zenas BioPharma is set to list its shares on the NASDAQ (NASDAQ: NDAQ) Stock Exchange on Sept. 13 under the ticker ZBIO. The company could raise between $181 million and $209 million through the public offering.

The firm will use the capital to fund ongoing trials for its drug, obexelimab, and to prepare for its launch if it receives approval. Let’s learn a bit more about what exactly Zenas' drug does and gauge its potential.

Zenas: Striving to Be a Bulwark Against Autoimmune Diseases

Backed by pharma giant Bristol-Myers Squibb (NYSE:BMY), Zenas’ drug obexelimab is working to fight against a variety of autoimmune diseases. Zenas is currently enrolling participants in Phase 2 Food and Drug Administration (FDA) trials for the treatment of warm Autoimmune Hemolytic Anemia (wAIHA) and multiple sclerosis (MS).

It has also initiated the Phase 2 trial for the treatment of Systemic Lupus Erythematosus (SLE) and is in the enrollment period of Phase 3 trials for Immunoglobulin G4-Related Disease (IgG4-RD).

Since obexelimab is closest to approval, let’s explore its potential for treating IgG4-RD. In the United States, the disease appears to affect a relatively low number of people, somewhere between 17,000 and 20,000 individuals.

Although this makes for a small market, the disease currently has no approved therapies. So, whichever drug emerges as a solid treatment for the disease could potentially take the whole market. However, there are competing treatments that are further along in trials. Amgen (NASDAQ: AMGN) recently got results on Phase 3 trials for its treatment UPLIZNA.

However, there is a notable difference between Zenas’ and Amgen’s treatments. They both work by suppressing B cells in the body. Although this helps mitigate symptoms, B cells are also very important for the immune system to function well. Extended B cell depletion can leave patients more vulnerable to infections and reduce the efficacy of vaccines.

Zenas emphasizes that after its treatment ends, B cells return to near-normal levels rapidly. In contrast, it may take several months to over a year before that happens with Amgen’s treatment. Zenas’ treatment mechanism is more targeted and aims to avoid the negative consequences involved in extended B-cell depletion.

Both Amgen’s and Zenas’ treatments have shown efficacy. Amgen's reduced the risk of symptoms resurfacing by 87%. Zenas said its treatment included “complete remission in most patients." It is difficult to compare the results directly because they used different means of measurement. Experts project that this market is currently around $3.7 billion and will grow to $5.3 billion by 2023.

Market Size of Other Diseases and Cash Position Analysis

Experts project that the SLE market will reach around $3 billion by 2030. However, according to Statista, the MS market is currently around $21.5 billion. Although it is the biggest market, it is also the most competitive, with many treatments already approved.

Here is a rough estimate of how long the company’s cash may last after its IPO. This is important, as it helps determine whether additional funding will be needed in the future that would dilute shareholders. As of Jun. 30, the company had $184 million in cash. At the midpoint, the IPO would raise $195 million. This would leave Zenas with around $379 million in cash.

Based on the average cash used in operations of $48 million in 2022 and 2023, that amount would last a little under eight years. That should be more than enough time to see sales of obexelimab if it is approved for IgG4-RD. It may be enough time to get it approved for the other indications as well. The company’s cash level doesn’t appear to be an issue based on the current cash burn.

Final Thoughts on Zenas’ Treatment

Overall, the differentiation of Zenas’ treatment is meaningful. Its treatment allows B-cells to return much faster than others. This benefits patients by reducing their infection risk after treatment. However, it may be difficult for the firm to compete with other treatments that are further along in trials or already approved.

The potential $681 million market cap after the IPO would assume the firm could capture revenue several times that amount eventually. For reference, the average price-to-sales ratio of the world’s top 10 largest pharmaceutical companies is 6x.

The article "IPO Alert: Bristol-Myers-Backed Pharma Stock Could Gain Traction" first appeared on MarketBeat.