Quick Take

Metacrine (MTCR) intends to raise $85 million from the sale of its common stock in an IPO, according to an amended registration statement.

The company is developing treatment candidates for NASH conditions.

MTCR is entering Phase 2 trials and will have significant capital to pursue its treatments for a large and growing disease.

For life science investors with an 18 – 24-month hold time frame, the IPO may be worth considering.

Company & Technology

San Diego, California-based Metacrine was founded to research treatments for NASH (NonAlcoholic SteatoHepatitis), which is a fast-growing disease globally.

Management is headed by president and Chief Executive Officer Preston Klassen, M.D., who has been with the firm since March 2017 and was previously EVP, Head of Research at Arena Pharmaceuticals and Chief Medical Officer at Laboratoris Sanifit S.L.

Below is a brief overview video of the NASH liver disease:

Source: American Liver Foundation

The firm’s lead candidate is MET409 and it is being developed both as a monotherapy and in combination with an anti-diabetic agent, for which it expects to begin a Phase 2a combination trial in 1H 2021 and a Phase 2a monotherapy trial 1H 2022.

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

Source: Company S-1 Filing

Investors in the firm have invested at least $122.5 million and include venBio, ARCH Venture Fund, Polaris Partners, New Enterprise Associates and Alexandria Venture Investments.

Market & Competition

According to a 2018 market research report by Allied Market Research, the global market for NASH treatments was valued at $1.2 billion in 2017 and is expected to reach $21.5 billion by 2025.

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This represents a forecast CAGR (Compound Annual Growth Rate) of 58.4% from 2021 to 2025.

Key elements driving this expected growth are a surge in the incidence of diabetes resulting in greater risk of obtaining NASH as well as sharply increased development of treatment options amid greater awareness of the disease and its potential treatments.

Also, a breakdown of the different drug types used to treat NASH is shown below:

Major competitive vendors that provide or are developing treatments include:

  • 89Bio (ETNB)

  • Akero Therapeutics (AKRO)

  • Allergan (GAN)

  • Bristol-Myers-Squibb (BMY)

  • CymaBay Therapeutics (CBAY)

  • ENYO PHarma SA

  • Intercept Pharmaceuticals (ICPT)

  • Numerous other firms

Financial Status

Metacrine’s recent financial results are typical of a trial stage biopharma in that they feature almost no revenue and significant R&D and G&A expenses associated with advancing its pipeline through stages of development.

Below are the company’s financial results for the past two and ½ years (Audited PCAOB for full years):

Source: Company registration statement

As of June 30, 2020, the company had $17.1 million in cash and $16.4 million in total liabilities. (Unaudited, interim)

IPO Details

MTCR intends to sell 6.54 million shares of common stock at a midpoint price of $13.00 per share for gross proceeds of approximately $85 million, not including the sale of customary underwriter options.

Assuming a successful IPO at the midpoint of the proposed price range, the company’s enterprise value at IPO would approximate $298 million.

Excluding effects of underwriter options and private placement shares or restricted stock, if any, the float to outstanding shares ratio will be approximately 25.23%.

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

approximately $10.0 million to fund our planned MET409 Phase 2a combination clinical trial in NASH through completion;

approximately $15.0 million to fund our planned MET642 Phase 2a monotherapy clinical trial in NASH through completion;

approximately $5.0 million to fund a Phase 2a monotherapy clinical trial of either MET409 or MET642 in UC through initial partial enrollment;

approximately $9.0 – $13.0 million to fund a Phase 2b monotherapy clinical trial of either MET409 or MET642 in NASH through initial partial enrollment; and

the remainder to fund any potential future clinical trials and preclinical programs, and for working capital and other general corporate purposes, including the additional costs associated with being a public company.

Listed underwriters of the IPO are Jefferies, Evercore ISI, RBC Capital Markets and Canaccord Genuity.Management’s presentation of the company roadshow is not available.

Commentary

Metacrine is seeking US public capital market investment to advance its pipeline of NASH treatments into phase 2 efficacy trials.

The firm’s lead candidate is being developed as both a monotherapy and a combination agent, with Phase 2 trials expected to begin in early 2021 and 2022.

The market opportunity for developing treatments for NASH is large and expected to grow at an extremely high rate over the coming decades.

As a result, there are numerous competitors developing competing treatments, so the firm is one among a large cohort of early, mid and late stage firms seeking to provide effective treatments.

The firm previously had a collaboration with Novo Nordisk, where it received a nominal amount of collaboration revenue, but that collaboration has concluded.

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The company’s investor syndicate includes a number of well-known and highly-regarded biopharma venture capital investment firms, so that speaks well to the firm’s potential.

As to valuation, management is seeking an enterprise value of $298 million at IPO. This figure is on the lower end of the typical range for a biopharma firm at IPO and is reasonable.

For life science investors with an 18 – 24-month hold time frame, the IPO may be worth considering.

Expected IPO Pricing Date: September 15, 2020.

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