Abivax Readies $250 Million U.S. IPO For Drug Pipeline

A Quick Take On Abivax

Abivax SA (ABVX) has filed proposed terms to raise $250 million from the sale of its American Depositary Shares representing underlying ordinary shares in an IPO, according to an amended SEC registration statement.

The company is a clinical-stage biopharma firm advancing treatment options for chronic inflammatory diseases.

Given ABVX’s late stage of lead candidate development, strong resources, and high-quality investor base, for life science investors with a patient time horizon, my outlook on the IPO is a Buy at up to $13.50 per ADS.

Abivax Overview

France-based Abivax SA is developing treatment candidates for chronic inflammatory diseases such as moderate to severe ulcerative colitis [UC] and Crohn's disease [CD].

The company is led by Chairman and CEO Marc de Garidel, who has been with the firm since May 2023 and was previously CEO at CinCor Pharma and led its sale for up to $1.8 billion.

The firm's lead candidate, Obefazimod, is in Phase 3 clinical trials as a monotherapy for Ulcerative Colitis.

ABVX is preparing to enter Phase 2 trials for Crohn's Disease for its lead candidate.

Below is the current status of the company’s drug development pipeline:

The company has booked fair market value investment of $290 million as of June 30, 2023 from investors, including TCG, Truffle Capital, Sofinnova, Invus, Deep Track Capital and Venrock.

According to a 2020 market research report, the global market for treatments for ulcerative colitis was an estimated $6.8 billion in 2018 and is forecast to reach $10.25 billion by the end of 2027.

This represents an estimated CAGR of 4.6% from 2019 to 2027, a moderate growth rate.

The primary elements producing this expected growth are a growing number of available treatments from ongoing clinical research that seek to ameliorate symptoms and stimulate colon healing activity.

The Asia-Pacific region is expected to grow at a CAGR of over 5% from 2020 to 2027 and to account for 8% of the global market demand by the end of 2027.

Major competitive vendors that provide or are developing related treatments include:

• UCB

• Applied Molecular Transport

• Arena Pharmaceuticals

• Bristol-Myers Squibb

• Galapagos

• Gilead Sciences

• Gossamer Bio

• Pfizer

• Others.

Abivax SA Financial Status

The firm’s recent financial results are usual for a development-stage biotechnology company in that they feature relatively high levels of operating losses.

Below are the company’s financial results for the past two calendar years:

As of June 30, 2023, the company had $120.1 million in cash and $95.1 million in total liabilities.

Abivax IPO Details

ABVX intends to sell 18.67 million shares of American Depositary Shares representing underlying ordinary shares at an estimated price of $13.39 per share for gross proceeds of approximately $250 million, not including the sale of customary underwriter options.

No existing or potentially new shareholders have indicated an interest in purchasing shares at the IPO price.

The company will be an emerging growth company and a foreign private issuer, both of which will allow management to provide less information to U.S. shareholders, which may affect the desirability of the shares to potential investors.

Assuming a successful IPO at the midpoint of the proposed price range, the company’s enterprise value at IPO (excluding underwriter options) would approximate $528 million.

The float to outstanding shares ratio (excluding underwriter options) will be approximately 30.5%.

Per the firm’s most recent regulatory filing, it plans to use the net proceeds as follows:

approximately €170.0 million ($178.9 million, assuming an exchange rate of €0.9502 per U.S. dollar, the exchange rate on October 13, 2023 as reported by the European Central Bank) to fund the development of obefazimod for UC;

approximately €15.0 million ($15.8 million, assuming an exchange rate of €0.9502 per U.S. dollar, the exchange rate on October 13, 2023 as reported by the European Central Bank) to fund the development of obefazimod for CD; and

the remainder for working capital and for other general corporate purposes, including in the continued research to identify new compounds and the payment of maturities of existing debt agreements as they become due (mostly allocated to payments under the Kreos / Claret Financing, and assuming that we will repay the Heights Financing through the issuance of new shares instead of making cash payments).

(Source - SEC.)

Management’s presentation of the company roadshow is available here until the IPO is completed.

Regarding outstanding legal proceedings, management said the firm is not a party to any legal proceeding that would have a material adverse effect on its financial condition or operations.

Listed bookrunners of the IPO are Morgan Stanley, Leerink Partners, LifeSci Capital and Bryan, Garnier & Co.

Commentary About Abivax

ABVX is seeking U.S. public capital market investment for its pipeline development plans.

The firm's lead candidate, Obefazimod, is entering Phase 3 clinical trials in the U.S. as a monotherapy for Ulcerative Colitis, and the company is also preparing to enter Phase 2 trials for Crohn's Disease.

The market opportunity for the firm’s treatment candidates is substantial and forecasted to grow at a moderate rate of growth in the coming years.

Management hasn’t divulged any major pharmaceutical firm collaboration agreements or relationships.

The firm’s roster of existing investors includes a number of active life science institutional venture capital investors.

An unusual aspect of the firm’s financial condition is a EUR 75 million structured debt financing facility. Structured debt financing is not common for pre-commercialization stage biopharma firms.

Also, the lending facility contains various covenants and restrictions as well as warrant awards as part of the compensation for the lenders.

As for valuation expectations, management is asking IPO investors to pay an Enterprise Value of $528 million, which is above the top end of the typical range for biopharma firms at IPO.

So far in 2023, the vast majority of Biopharma industry IPOs have performed poorly post-IPO.

However, later-stage firms with ample resources have tended to fare better.

Given ABVX’s late stage of lead candidate development, strong resources, and high-quality investor base, for life science investors with a patient time horizon, my outlook on the IPO is a Buy at up to $13.50 per ADS.

Expected IPO Pricing Date: Week of October 16, 2023.

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