Benitec Fails to Fly

Well, after an intense week of waiting for Benitec (ASX : BLT / NASDAQ : BNTC) shareholders, we now know that BLT failed to fly. It’s had relatively mute coverage but I have heard fairly consistent feedback through my US investor network. The first bit of info is that BLT didn’t have remotely the subscription demand it needed to price at $13+ bucks a share, and any interest was at a much lower price-point. To be fair, it was a bit of a soft week, but my understanding is that an investor “saturation” reaction to RA Capital’s fetish for floating RNAi companies also played a role (remember, Benitec was not at the front of the queue, so to speak). Let’s be honest, Dicerna (NASDAQ : DRNA) is still pretty fresh in everyone’s mind. However, the main message I got from a few dawn telephone calls is that the company is just too early and the fundamental technology is just not hot enough to take the risk at even ten bucks a share.

From big pop to fizzle... DRNA

From big pop to fizzle… DRNA

Finally, on the basis of the market reaction to the company, the consensus seems to be that BLT’s IPO is not just postponed – but probably indefinitely postponed. There seems to be a misconception that just because an IPO is “fully underwritten” by BMO that somehow an IPO is going to magically happen as a matter of certainty. If a company fails to price, it fails to price and an underwriter’s agreement is not an infinite agreement. Pricing is very tactical and Benitec, rightly or wrongly, went out with a very narrow range at a tough time of the year and for a relatively big chunk of change.

I was always told that the first rule of a public offering is when you file, IPO fast. There was about 6 weeks from F-1 to IPO, and that is definitely on the speedy side, certainly indicative of the quality of Benitec’s underwriter (the BMO team is fantastic). No doubt that the BLT team also worked incredibly hard to make it happen. But failing to price is going to hurt Benitec a lot and, frankly, doing an IPO in July/August was always a going to be a massive risk for Benitec because half of Wall St. is still down in the Hamptons.

My take?

1) The timing of this IPO is wrong for Benitec because it is too early. The company just doesn’t have enough data. To elaborate this statement, Benitec has no efficacy data in humans. Because Benitec insists on telling us every other day when a patient is dosed, the market has established its own timeline of when any efficacy data will be available, so why put money into the company before then? Frankly, it would be completely stupid to buy the equity now, wait a few months (since the current TT-034 study is about half-way through dosing), and then find out that the drug probably* doesn’t work as a “single shot”. Because let’s be clear, if it doesn’t work as a “single shot”, BLT has no story to tell and is pretty much dead in the water.

2) The use of proceeds to develop TT-034 doesn’t gel with the rapidly evolving standard of care for HCV treatment, and raising money for a technology platform proof-of-concept (PoC) with a low probability of competing in the marketplace isn’t an investment-worthy proposition. You don’t raise $70m for a platform, you raise it for a medicine that is going to change patient care.

3) Last year Benitec raised AUD $32m and has so far given us six patients (dosed, no efficacy data) for HCV. I’ve read the investment prospectus like everyone else and I don’t see how an IPO is going to accelerate the first major value inflection point of safety/efficacy.

To conclude, Benitec doesn’t have an IPO story worthy of the US market. In the current climate, the only story that anyone cares about is whether or not a drug works in patients. Benitec simply doesn’t have this story and that’s why it failed to IPO. 

There is, of course, always Monday – but the chances are slim.


*I say “probably” because the primary end-point of NCT01899092 is not efficacy and even secondary end-points related to efficacy don’t establish a clear threshold of response criteria to the treatment.

23 thoughts on “Benitec Fails to Fly

  1. And in a restructuring of the industry, should they have proved PoC, what then? You expect shareholders to take on the role of R&D sponsors instead of the government?

    Kind of goes against all the teachings of the text books I’ve read.

    D is for discovery in this context. Not development.

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    • I don’t understand?

      I am not talking textbooks, I am talking reality. They got 30-odd million bucks last year, they should have proven their shit first.

      No problems with tapping the public markets early, I am all for it. But when you burn through $40m smackeroos (over two financings) better have something interesting to show before NASDAQ.

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  2. Benitec has equally passionate friends and enemies. That can mean only one thing. . . we are a threat. Please speculate on success of ddrnai to cure HIV, Hep C, and Hep B . . .

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    • Hi there – I’ve written extensively about the technology in this forum. Please do a “search” for Benitec or alternatively click on the Benitec link in the “tag cloud” and you will find a fairly detailed analysis of the technology.

      To be clear, I think the fundamental concept of ddRNAi is fantastic but I don’t believe that Benitec’s strategy to deliver this is the right strategy. We have moved on very far from where Benitec is at, and when you are developing a technology like this you have to remember three things:

      1) The fundamental gene silencing technology has to have “durability” and the right level of long-term risk. ddRNAi probably satisfies this criteria.

      2) The “vector” (the delivery mechanism) needs to have the right immunogenicity, tolerance, repeat-dosing properties. It will be incredibly difficult to achieve “one shot” gene silencing and so repeat administration is probably likely to be a necessity. AAV isn’t going to accomplish this.

      3) The relative risk of a gene therapy (both in technology/clinical terms and marketing terms) to the state of a particular treatment market. One can hardly justify investing in a gene therapy against the backdrop of the drug landscape for HCV. HIV and HBV are different matters, but they also have very different scientific challenges. Drug compliance is a over-touted issue for HCV, especially considering the new treatment regimes. If I had a choice between taking a “next gen” combo-antiviral for a few weeks (even feeling crappy for doing so) and a gene therapy that may or may not bite me on the ass 20 years down the track, I’d choose the former. And I say that as generally an advocate of gene therapy.

      If a patient has cystic fibrosis and you can modify a SNP using a gene therapy, then do it! There isn’t much alternative. But HCV with what we already have to combat the disease? I don’t think so.

      Finally, I would like to say I am not an “enemy” of Benitec. I am an admirer of Peter French for his tenacity. I recognise that the technology is very challenging and hats off to Benitec for their “phoenix” manoevre. But unfortunately, I don’t think it will ultimately succeed.

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  3. Yeah, Not very clear. I mean, it is unfair for the expectation of early stage R&D to be borne by government while the profits of commercialization are accrued by those lucky few shareholders who are able to hijack the market and its processes. Just as it is unfair for it be borne by shareholders because sooner or later they will all be tapped out and/or make a discovery that could be significant enough to hold the rest of the world to ransom. Monsanto and the rice case for example.

    So what I am saying is, if they have a PoC that validates their science but has no commercial value and needs tens or hundreds of millions of dollars to develop, what then?

    Well, in the first instance you end up where they are now. In the second, smart people will realize the market is the wrong place for this. The right place, would be as a subset of a larger entity.

    Hence, I find your conclusion to be completely correct. There is no IPO. And a buyout is on its way.

    A quick and dirty rule of thumb guide is traffic on the subject at HC. Those there seem to be of the mind that if you say something often enough, those reading it will believe it in the absence of proof to the contrary. The traffic has spiked incredibly in the last few days or week or so pumping the IPO. That in my mind is proof enough there isn’t one.

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    • I am in agreement wit much of what you say. I do think, in rare circumstances, a proper “proof-of-concept” is still needed to unlock the potential of a platform technology. This may even be true of gene therapy, I just think this isn’t the therapeutic/modality that is going to accomplish this. I stand by my earlier comments that 10 years ago, this company would be transformational but not today. It’s an all-too-common disconnect between where a technology “lies” and where a market “goes”. Sometimes a capability and a “need” (or, in the case of gene therapy “acceptance”) don’t line up, and I say that as someone who has tried to raise money for a gene therapy company. I actually feel for Peter French in that regard.

      However, regarding the buy-out comment… well, although a “dual path” is very common with an IPO (sometimes an IPO is a trigger for M&A) I would be highly surprised. It’s possible that next week Benitec will announce that it has been acquired but I am doubtful. Acquire what?

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      • “It’s possible that next week Benitec will announce that it has been acquired but I am doubtful. Acquire what?”

        Why do you think they just bought the HBV assets off the Chinese for?

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      • Honestly? If this is a real question then I am happy to answer it, but if it is just another “set up” for HotCopper like “inapinchpenny” then don’t bother…

        My personal opinion is that BLT did the Chinese deal so that they don’t have to explain an amorphous and poorly nailed down relationship as part of an IPO roadshow. Do your homework and read the agreement with Bionomics, it’s in their F-1 filing.

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      • Agree. . . so we had to use this old-school, 1990’s Volvo of a vector to get the HCV construct into clinical trial. Surely, more proven, elegant and effective vectors will allow future clinical trials using ddrnai.

        We often think of the number 8 as a version of AAV. . . Ok.

        How many versions of AAV8 are known to the scientific community?

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  4. I cannot disagree. However, AAV8 did get us in the clinic. AAV8 today, better vector in the future. I will say, in 1993, it was my personal idea to use a viral capsid for medication delivery. It is difficult to let go of the idea. That being said, when we get enough money, another vector will not be a problem.

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  8. Chris, time to revisit your PYC post a while back. Please repost now the rights issue is over. Or is it they who are wielding the big stick?

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