Kaleido Bio Downsizes IPO, Raises $75M for Microbiome Drug Tests

Xconomy Boston — 

Microbiome drugs developer Kaleido Biosciences is joining the ranks of publicly traded biotechs, but it had to sell more shares and cut their price.

The Lexington, MA, company priced its downsized initial public offering of 5 million shares at $15 each, well below the $20 to $22 range it had initially planned. Those shares are expected to begin trading Thursday on the Nasdaq exchange under the stock symbol “KLDO.”

Kaleido emerged in 2017 after incubating within venture capital firm Flagship Pioneering for two years. The company aims to treat disease by targeting the human microbiome, the community of microorganisms inside the body and on its surface that research shows is also involved in health and disease. Kaleido says its “microbiome metabolic therapies” (MMT) are molecules that are designed to treat disease by altering the metabolism of the microbiome.

The company’s lead drug candidate KB195 has completed Phase 1 testing in hyperammonemia, a metabolic disorder that leads to high levels of ammonia in the blood. Kaleido says this drug could treat urea cycle disorder (UCD), an inherited form of hyperammonemia that leads to a deficiency of an enzyme that helps process urea. The drug could also treat hepatic encephalopathy (HE), another type of hyperammonemia in which damage to the liver impairs the organ’s ability to filter ammonia and other toxins from the blood.

According to its prospectus, Kaleido will use approximately $60 million of the IPO proceeds to advance its lead drug into Phase 2 testing in adult UCD patients. The company adds that it hopes data from the study will support the inclusion of children in clinical testing, because UCD is mainly a pediatric disease. However, Kaleido also noted that recruiting children for clinical trials is difficult.

Kaleido plans to use the rest of the IPO cash for drug development beyond hyperammonemia, as well as investments in its microbiome technology and its efforts to discover new therapies. The company says in the filing that it will need to raise additional cash to complete Phase 2 testing of its lead drug in HE.

Kaleido, which filed for its IPO during the partial federal government shutdown, is the latest microbiome startup from Flagship to go public. Evelo Biosciences (NASDAQ: EVLO) raised $85 million in its IPO last year to fund clinical development of microbiome therapies for autoimmune disorders and skin cancer.

But the experience of another Flagship portfolio company, Seres Therapeutics (NASDAQ: MCRB), shows the perils of this new field of drug research. In 2016, the company’s lead drug failed a mid-stage study for Clostridium difficile infection in the gut, only to later receive the FDA go-ahead to resume testing. But patient recruitment for that study has been difficult. Earlier this month, Seres announced management changes and layoffs following a review of its drug pipeline.

Kaleido spent $42 million on research and development last year, a 91 percent increase compared to 2017. Flagship is the company’s largest shareholder with a 67.6 percent stake prior to the IPO, according to the filing.

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