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.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.
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.