If biotech’s historic bull run is losing steam, as some observers believe, this week is one hell of a final stampede.
Adaptive Biotechnologies of Seattle just raised $300 million. BridgeBio Pharma of Palo Alto, CA, has topped it, raising $348.5 million. Both begin trading Thursday. The combined haul is a remarkable sum, more than 2 percent of the $28 billion that biotechs raised via IPOs up to this week during a six-year “super-cycle” that began in 2013, according to SVB Leerink analyst Geoffrey Porges.
In a report published this week, Porges isn’t ready to declare the long boom over, but he sees a few warning signs, like a drop in financing across the biotech sector. He also notes that just over half (53 percent) of the biotechs that have gone public during this super-cycle have disappointed investors, with annualized returns of negative 10 percent or worse.
With that track record in mind, investors taking a crack at Adaptive are making somewhat of an old-school biotech bet.
In another era, life-science companies often started not with drugs themselves but with underlying technology and laboratory tools—such as new ways of creating engineered antibodies—that other companies would buy to hunt for and develop drugs. (Think of them as store owners selling picks and axes to would-be gold miners.)
But in the biotech world, the lure of gold—both the fortune and the prestige of bringing a new drug to market—could drive tool makers too. So-called “platform” companies would try to cut deals with their clients—drug companies—to get a sliver of rights to medicines that might emerge from their collaboration, then build a pharma business from there.
“It was absolutely the business model du jour, the model I grew up with,” says Camille Samuels, a partner at venture firm Venrock. “If you aspired to get a drug to [market], you had to use dollars beyond venture capital.”
Some of those companies, like Exelixis (NASDAQ: EXEL), are still around, while others such as Abgenix and most recently Array BioPharma (NASDAQ: ARRY) became buyout targets. Some, like Deltagen, have faded into history.
Now a decade old, having raised more than a half a billion dollars privately, Adaptive is following that lure. It already has a business based on sophisticated technology that sequences the DNA of immune cells. Doctors use Adaptive’s tests to monitor patients for recurrent cancer, and drug companies use them in their research and clinical trials. The firm reported $55 million in revenue in 2018. Part of its diagnostics ambitions include a single blood test for a wide range of diseases that it is developing with Microsoft (NASDAQ: MSFT). Adaptive says a more focused set of tests should emerge from the work next year for FDA review. Microsoft stands to gain from a successful Adaptive IPO; it bought $45 million in private shares as part of their collaboration.
But Adaptive wants its own pharma business, too. More than three years after announcing its drug-development ambitions, the firm unveiled its first deal earlier this year: A $300 million down payment from Roche’s Genentech division to work on cellular therapies for cancer. Estimating its future potential, Adaptive’s IPO documents assigned far more market opportunity to cancer treatments business than to research tools or diagnostics.
The company was founded by the Robins brothers. Chad Robins (pictured) is Adaptive CEO and chairman. His brother Harlan is chief scientific officer and recently resigned from his longtime post at the Fred Hutchinson Cancer Research Center in Seattle, where he did the immune sequencing work that led to the creation of Adaptive.
Before the IPO, Chad and Harlan Robins owned 6.3 percent and 1.5 percent of Adaptive’s shares, respectively. The largest shareholder was US hedge fund Viking Global, with 36 percent.
Company officials declined an interview, citing federal “quiet period” restrictions.
Photo by I Sometimes Dream Event Photography.