Motif Bio (LON:MTFB) is forging ahead with plans to list its stock on Nasdaq. The British biotech has formalized its long-standing interest in a U.S. listing by filing paperwork with the SEC, setting it up for an IPO it hopes will deliver the cash it needs to wrap up a Phase III trial of its antibiotic, iclaprim.
London-based Motif Bio has yet to set the terms for the IPO, but has given an indication of what it is hoping to achieve. In a notice to shareholders to seek authority to sell up to 100 million shares, the company notes that it would raise approximately $60 million (€54 million) if it were to sell all that stock at the dollar equivalent to the share price in London it commanded prior to news of the IPO. The stock rose 9% in the hours after details of the IPO emerged.
While $60 million is the forecast upper end of the size of the IPO, other aspects of the notice suggest the actual haul may be somewhat less. Invesco Asset Management, which currently owns 25% of Motif Bio, has said it will snap up some of the stock listed in the Nasdaq IPO. In a simulation to show how much Invesco might invest, Motif Bio assumes the proposed offering will total $35 million. Under these circumstances, Invesco would buy shares worth $8.9 million.
Where the IPO comes in on the $35 million to $60 million range will have an effect on Motif Bio’s drug development plans. The top priority is to secure money to complete two pivotal clinical trials of iclaprim as a treatment for acute bacterial skin and skin structure infections. If successful, the trials will give Motif Bio the data it needs to pursue marketing approvals on both sides of the Atlantic. As a qualified infectious disease product, iclaprim will benefit from priority review at FDA.
Motif Bio will use another tranche of the first $35 million raised through the IPO to prepare for a Phase III trial of iclaprim in hospital-acquired bacterial pneumonia. The expectation is that Motif Bio will have completed preparations by the end of 2016, but its capacity to start dosing patients is tied to its ability to find funding above and beyond $35 million. A bumper IPO would be one way to achieve that, but Motif Bio is also looking at fallback options such as partnerships and grants.
The multipronged pursuit of cash is in keeping with the strategy pursued by Motif Bio over the past couple of years. Motif Bio listed in London last year, raising just £2.8 million initially before going on to pull in a further £22 million months later following a jump in its stock price. In January, Motif Bio signaled its intent to list on Nasdaq by appointing an investment bank to help with the process, only to enlist the support of a M&A specialist in March to give it a possible alternative source of cash.
Given the ongoing ambivalence to biotech IPOs on Wall Street, Motif Bio may yet need to rely on deals for money to wrap up its Phase III trial. Yet, for Motif Bio, the ability to generate money is just one part of the motivation for a Nasdaq IPO. The company also thinks it is the only way it can secure a fair valuation of its business. As it stands, Motif Bio has a market cap in London of approximately $73 million.
Nasdaq-listed Paratek Pharmaceuticals ($PRTK), which Motif Bio regards as a peer, commands a market cap of $300 million. Motif Bio sees listing on Nasdaq as a way to close this valuation gap. Other European biotechs involved in niche areas of the industry, such as gene therapy specialist uniQure ($QURE), have also felt they have to go stateside to be valued fairly.