NantHealth leans heavily on Celgene, Soon-Shiong for $91M IPO

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NantHealth ($NH), Dr. Patrick Soon-Shiong’s precision medicine play, has raised $91 million through an IPO. Existing investors including Soon-Shiong and Celgene ($CELG) bought $43 million of the stock, giving NantHealth enough money to support its cash-burning operation for at least another year.

Entities associated with billionaire surgeon Soon-Shiong picked up $5 million of the stock offering. As such, other existing investors accounted for $38 million of the IPO haul. Celgene is the only existing investor to participate in the IPO that is named in NantHealth’s filings with the SEC. Collectively, the existing investors have enabled NantHealth to net $83.3 million after costs--a sum that could grow to $96.3 million if an overallotment is taken up--without having to persuade new investors to bankroll an IPO of that magnitude. Existing investors were originally slated to buy $70 million of the IPO stock.

The new financiers have gained a stake in a company with grand ambitions but limited commercial impact, at least to date. Soon-Shiong has pitched NantHealth as the Google ($GOOG) of the genome. In practice, this means NantHealth is corralling data from various sources and making them available in a format that supports decision-making by physicians and drug development by biopharma companies. The focus of the R&D support offering is to “accelerate development of drugs for critical illnesses based upon the unique biology and specific health conditions of patients.”

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As it stands, NantHealth has invested heavily in an operation it claims will support these agendas for limited return. Last calendar year, NantHealth generated revenues of $58.3 million, a sum that led it to make a net loss of $72 million. According to NantHealth, it derived some of the revenue from drug development service deals. Typically, these deals see NantHealth provide services related to cancer drug development under fixed-price contracts. NantHealth also makes money through genomics and proteomics analysis services.

Some of these business activities could expand following the injection of the IPO cash, but the SEC filings from NantHealth reveal little about how it plans to spend the haul. NantHealth has earmarked $9 million to cover some taxes, with a slice of its remaining money being allocated to the nebulous activities of “[commercializing] new solutions and product extensions and potentially [pursuing] targeted acquisitions.” However the money is spent, it will be spent quickly. NantHealth is only committing to its current cash reserves seeing it through the next 12 months.

As of the end of March, NantHealth’s cash pile sat at just shy of $25 million, a sum that represents a small slice of the money it has raised in recent years. One year ago, Allscripts ($MDRX) invested $200 million. And in October 2014, NantHealth said a $250 million investment from Kuwait Investment Authority (KIA) had brought its Series B round up to $320 million. The SEC filings make reference to KIA, although in the context of a $150 million investment made in June 2014. That investment offers one explanation for why NantHealth has braved the frosty IPO market.

Under the terms of the $150 million investment, KIA could make NantHealth buy back the shares it acquired, plus pay interest, if the genomics player failed to meet certain IPO timelines. The schedule said NantHealth must have filed a S-1 with the SEC by Dec. 20, 2015 and have a firm commitment underwritten public offering in place by June 20, 2016. NantHealth filed a S-1 confidentially in November, but the Kuwait investment vehicle “does not believe this confidential submission satisfied our obligation,” NantHealth said.

As such, while the schedule of the NantHealth IPO has closely followed the deadlines of the Kuwait agreement, it is possible KIA will still force the sale of the stock. With interest, the transaction would total $170 million. NantHealth will know by June 20 whether KIA plans to make it acquire the stock, but it has already taken precautionary measures. NantWorks, the firm that sits over Soon-Shiong’s web of startups, has agreed to pick up the tab in the event KIA takes up its option to sell up.

- read the FWP
- and the S-1/A

Related Articles:
Soon-Shiong tries again with NantHealth IPO for up to $92M--even with ongoing whistleblower suit
Billionaire Soon-Shiong scores a record-setting $2.6B IPO for NantKwest
Celgene backing Soon-Shiong's cancer biotech IPO, now dubbed NantKwest

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