Buoyed by insiders, Flagship’s Evelo hits midpoint of IPO range

Evelo Biosciences has priced its IPO at the midpoint of the range, giving it a gross haul of $85 million. The Flagship Ventures-backed microbiome startup is getting the IPO away with the strong support of its existing investors, who are set to contribute $40 million of the total haul. 

Cambridge, Massachusetts-based Evelo rolled the dice by filing to go public before generating clinical data to validate what is, by its own admission, an unproven approach. But with insiders stepping up, Evelo has hit the midpoint of its $15 to $17 a share range and its total haul could still creep up toward its penciled-in $100 million maximum if the overallotment is sold in full.

Evelo is yet to say which of its existing investors have contributed to the $40 million IPO commitment, but it has some deep-pocketed backers to draw on. In addition to Flagship, Evelop tapped GV, Celgene, Alexandria Venture Investments and Mayo Clinic for VC cash to fuel its early years.

The private investments left Evelo with $114 million in the bank as of the end of March. With net proceeds from the IPO set to come in at $76 million or more, Evelo has the means to spend up to $85 million to take inflammatory disease and oncology programs to clinical proof of concept. Evelo has set aside a further $35 to $45 million to invest in its platform and preclinical pipeline. 

Securing the money positions Evelo to start learning whether its approach to inflammatory diseases and cancer works in humans. The pipeline consists of orally-administered microbial strains intended to up or down-regulate immune pathways by interacting with immune cells in the gut.

If Evelo is right, the approach could provide a safer way to intervene early in inflammatory diseases, improving outcomes for patients with conditions including psoriasis or atopic dermatitis. When flipped on its head, the same platform could also upregulate the immune response against tumors, making the pipeline prospects natural bedfellows for checkpoint inhibitors.