Allakos Inc. ALLK $15.00-$17.00 6.0 million shares Underwriters:
Goldman Sachs, Jefferies Co-Managers: William Blair | Proposed trade date of 7/19 | They are a
clinical stage biotechnology company developing AK002, their wholly owned
monoclonal antibody, for the treatment of various eosinophil and mast cell
related diseases. AK002 demonstrated pharmacodynamic activity in both of their
completed Phase 1 trials, and in the single ascending dose Phase 1 trial
involving patients with indolent systemic mastocytosis, patients reported
improvements in their symptoms.
Allakos Inc.
ALLK
- 6,000,000
shares to be offered between $15.00
and $17.00 per share
- Underwriters:
Goldman Sachs, Jefferies Co-Managers: William Blair
- Proposed
trade date of 7/19
- Rating
= 3
Click here
to view the prospectus.
https://www.sec.gov/Archives/edgar/data/1564824/000119312518214117/d447521ds1a.htm
Company
Overview
They are a clinical stage biotechnology company
developing AK002, their wholly owned monoclonal antibody, for the treatment of
various eosinophil and mast cell related diseases. AK002 demonstrated pharmacodynamic activity in both
of their completed Phase 1 trials, and in the single ascending dose Phase 1
trial involving patients with indolent systemic mastocytosis (“ISM”), patients
reported improvements in their symptoms. AK002 selectively targets both
eosinophils and mast cells, which are types of white blood cells that are
widely distributed in the body and play a central role in the inflammatory
response. Inappropriately activated eosinophils and mast cells have been
identified as key drivers in a number of severe diseases affecting the
gastrointestinal tract, eyes, skin, lungs and other organs. As such, AK002
has the potential to treat a large number of severe diseases. They are
developing AK002 for the treatment of eosinophilic gastritis (“EG”) and
eosinophilic gastroenteritis (“EGE”). In addition, they are conducting studies
in ISM, chronic urticaria (“CU”) and severe allergic conjunctivitis (“SAC”) and
are evaluating additional indications for future development.
Despite
the knowledge that eosinophils and mast cells drive many pathological
conditions, there are no approved therapies that selectively target both
eosinophils and mast cells. Current
treatments for the diseases they are pursuing are non-selective and
often come with serious side effects that make them unsuitable for long term
use. AK002 binds to Siglec-8, an inhibitory receptor found on
eosinophils and mast cells, which represents a novel way to selectively deplete
or inhibit these important immune cells and thereby resolve inflammation. They
believe AK002 is the only Siglec-8 targeting antibody currently in
clinical development and has the potential to be an alternative to current
treatments.
They
have shown that AK002 depletes eosinophils and inhibits mast cell activation in
Phase 1 clinical trials. In a
randomized, double-blind, placebo-controlled Phase 1 trial in 51 healthy
volunteers, all doses of AK002 resulted in complete depletion of blood
eosinophils within one hour after administration. The duration of depletion was
dose-dependent, with a single dose of 1.0 mg/kg of AK002 suppressing
eosinophils for up to 84 days. In addition, in the single dose portion of a
Phase 1 trial in 13 patients with ISM, a disorder characterized by an
increased number of mast cells throughout the body and symptoms related to mast
cell activation, patients reported marked improvement in ISM mast cell related
symptoms and blood eosinophils were depleted.
They
are currently testing AK002 in a double-blind, placebo-controlled Phase 2 trial
in patients with EG with or without eosinophilic gastroenteritis (“EGE”). EG and EGE are severe eosinophilic inflammatory
diseases of the stomach and small intestine, respectively. AK002 has received
orphan drug designation for EG and EGE from the U.S. Food and Drug
Administration (“FDA”) and they expect to report top-line data from
the Phase 2 trial in mid-2019. As a follow up to the single dose portion of the
Phase 1 trial in patients with ISM, they are also testing AK002 in an ongoing
six month multi-dose Phase 1 trial in ISM patients. Further, AK002 is being
tested in an open-label Phase 2 trial in patients with CU and in a Phase 1
trial in patients with SAC. CU is a group of inflammatory skin diseases
that are caused by the inappropriate activation of mast cells in the skin. SAC
is a group of allergic eye diseases that are caused by eosinophil and mast cell
driven inflammation in the tissues lining the eyes and eyelids. They expect
to report top-line data from these three trials in ISM, CU and SAC
patients in the first quarter of 2019. The status of their clinical trials
is shown below.
They
have prioritized their AK002 development efforts based on their assessment of
the probability of clinical and regulatory success, unmet medical need and
potential market opportunity. They have
assembled a team with a proven track record and deep experience in antibody
discovery and in clinical development, commercialization, operations and
finance from companies such as Genentech, Gilead, Intermune, Novo Nordisk,
Pfizer, ZS Pharma and others. Since their inception, they have raised private
capital from investors including Alta Partners, RiverVest Partners, Roche
Finance Ltd, 3x5 Special Opportunity Partners, New Enterprise Associates,
RedMile, Partner Fund Management, Samsara and RockSprings.
IPO
Detail
This is the initial public offering of Allakos
Inc. and no public market currently exists for its common stock. Allakos Inc.
is offering 6,000,000 shares of common stock as described in the prospectus.
The company expects the initial public offering price of its common stock to be
between $15.00 and $17.00 per share.
The company has applied to list its common stock on the NASDAQ Global Market
under the symbol “ALLK.”
|
Common stock
offered by the company |
6,000,000 shares |
|
Common stock to
be outstanding immediately after this offering |
39,710,859
shares |
New Enterprise Associates 16,
L.P. (“NEA”), an existing stockholder of theirs, has indicated an interest in
purchasing approximately $10.0 million in shares of their common stock at
the initial public offering price (or 625,000 shares based on the assumed
initial public offering price of $16.00 per share) in a proposed private
placement that would close concurrently with this offering. This indication of
interest is not a binding agreement or commitment to purchase, and they could determine
to sell more, fewer or no shares to this potential purchaser and this potential
purchaser could determine to purchase more, fewer or no shares in the proposed
concurrent private placement. The shares that may be sold in the proposed
concurrent private placement will not be registered in the offering, will
constitute restricted securities under the Securities Act of 1933, as amended,
and will be subject to a market standoff agreement with them and lock-up
agreement with the underwriters for a period of 180 days after the date of
this prospectus. They will receive the full proceeds from and will not pay any
underwriting discounts or commissions with respect to the shares that are sold
in the proposed concurrent private placement. The closing of this offering is
not conditioned upon the closing of such concurrent private placement.
Use of
Proceeds
They
estimate that the net proceeds to them from the sale of the shares of their
common stock in this offering will be approximately $86.3 million. The
principal purposes of this offering are to obtain additional capital to support
their operations, establish a public market for their common stock and
facilitate their future access to the public capital markets. They currently
anticipate that they will use the net proceeds from this offering as follows:
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• |
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approximately
$70.0 million for the development of their lead compound, AK002; and |
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• |
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the
remainder for other research and development activities, working capital and
general corporate purposes. |
They
expect that the net proceeds from this offering will allow them to complete their
Phase 2 trial for eosinophilic gastritis, Phase 2 trial for chronic
urticaria, Phase 1 trial for indolent systemic mastocytosis and Phase 1
trial for severe allergic conjunctivitis. They also anticipate that the net
proceeds will allow them to complete a nine-month safety exposure trial for
eosinophilic gastritis. Progressing the development of AK002 through FDA
approval for any of these indications will require additional financing, which
may not be available on acceptable terms, if at all.
Competition
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Blueprint
Medicines Corp. |
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BPMC |
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NASDAQ |
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Novartis
Pharmaceuticals |
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NVS |
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NYSE |
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Genentech
(subsidiary of Roche Holding Ltd.) |
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SWX |
They are not aware of any
other company or organization that is conducting clinical trials of a product
candidate that targets both eosinophils and mast cells, including any product
candidate that specifically
targets Siglec-8. Currently,
there are no therapies that have been approved by the FDA specifically for EG
or EGE, and they are not aware of any other planned pivotal trials in EG or
EGE. They are not aware of any FDA-approved treatment options that
target the underlying causes of ISM. Blueprint Medicines has announced it plans
to begin a trial evaluating avapritinib in ISM in the second half of 2018.
Xolair is a FDA-approved drug approved for the treatment of CSU. They
are not aware of any FDA-approved treatment options for cholinergic
urticaria or symptomatic dermatographism. Novartis Pharmaceuticals is currently
testing ligelizumab in a Phase 2 trial for chronic spontaneous urticaria. The
products that are currently available for treatment of SAC only provide
temporary relief for most patients and have little effect on moderate to severe
cases. They are not aware of any other company specifically targeting SAC.
Market
Opportunity
Eosinophilic Gastritis and Eosinophilic
Gastrointestinal Disorders EGIDs are chronic inflammatory disorders that
share a similar eosinophilic driven inflammation that occurs along different
segments of the gastrointestinal (“GI”) tract. EG is a rare disease that is
characterized by chronic inflammation due to patchy or diffuse infiltration of eosinophils
into layers of the stomach. EG can occur with eosinophilia isolated to the
stomach or often in combination with eosinophilia of the small
intestine. The estimated prevalence of EG in the United States is
approximately 20,000 to 25,000 patients, and the estimated prevalence of EGE in
the United States is approximately 25,000 patients, and they believe these
diseases may be significantly underdiagnosed based on their conversations with
gastroenterologists.
Indolent Systemic Mastocytosis Indolent systemic mastocytosis (“ISM”) is a rare
disease characterized by the clonal proliferation and accumulation of mast
cells in the bone marrow, respiratory and gastrointestinal tracts, and organs
such as the skin, liver, spleen and brain. Common symptoms include pruritus,
flushing, headache, cognitive impairment, fatigue, diarrhea, gastrointestinal
cramps, hypotension and skin lesions, as well as an increased risk for
osteoporosis and anaphylaxis, which in some cases can be life threatening. The
symptoms of ISM are attributed to mast cell activation and the systemic release
of mediators. Approximately 30,000 patients in the United States suffer from
ISM.
Chronic Urticarias – Cholinergic Urticaria,
Chronic Spontaneous Urticaria, Symptomatic Dermatographism Chronic urticarias (“CU”) are a
group of skin conditions which are characterized by recurrent transient
pruritic wheal and flare type skin reactions and, in roughly 40% of patients,
angioedema. Symptoms include itching, redness, raised welts, burning, warmth,
tingling and irritation of the skin. Patients with CU are often severely
impaired in their quality of life, with negative effects on sleep, daily
activities, school/work life and social interactions. The most common forms of
CU are chronic spontaneous urticaria (“CSU”), cholinergic urticaria and
symptomatic dermatographism. They estimate that approximately 200,000
patients with severe CSU, cholinergic urticaria and symptomatic dermatographism
could be candidates for therapy with AK002.
Severe Allergic Conjunctivitis Atopic keratoconjunctivitis (“AKC”), vernal
keratoconjunctivitis (“VKC”) and perennial allergic conjunctivitis (“PAC”) are
a set of allergic ocular conjunctival diseases primarily associated with
an IgE-mediated hypersensitivity reaction. They are focused on the
severe forms of these diseases, which are collectively referred to as severe
allergic conjunctivitis (“SAC”). These conditions are often caused by airborne
allergens, such as grass and tree pollens, coming into contact with the eyes,
which induces IgE mediated mast cell degranulation and allergic inflammation.
The inflammatory mediators released by the mast cell result in inflammation and
the infiltration of eosinophils, neutrophils and other immune cells. Symptoms
include itching, hyperemia, light sensitivity (photophobia), pain, eye
discharge and the sensation of having a foreign body in the eye. These symptoms
can affect quality of life and daily activities, such as reading, driving and
being in bright outdoor environments. In addition, patients with untreated
disease, in particular those with VKC and AKC, can experience remodeling of the
ocular surface tissues that can lead to vision loss. In addition to the primary
symptoms of allergic conjunctivitis, a high correlation of allergic rhinitis,
allergic asthma and atopic dermatitis comorbidities occur in this patient
population. They believe that approximately 50,000 to
150,000 patients in the United States suffer from severe AKC, VKC or PAC and
could be candidates for treatment with AK002.
|
|
|
Year Ended |
|
|
Three Months Ended |
|
||||||||||
|
|
|
2016 |
|
|
2017 |
|
|
2017 |
|
|
2018 |
|
||||
|
|
|
(in thousands, except
per share data) |
|
|||||||||||||
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Statements of
Operations Data: |
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|
|
|
||||||||||||
|
Operating expenses: |
|
|
|
|
||||||||||||
|
Research and
development |
|
$ |
14,672 |
|
|
$ |
18,506 |
|
|
$ |
4,364 |
|
|
$ |
6,401 |
|
|
General and
administrative |
|
|
2,388 |
|
|
|
3,748 |
|
|
|
613 |
|
|
|
2,308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating
expenses |
|
|
17,060 |
|
|
|
22,254 |
|
|
|
4,977 |
|
|
|
8,709 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
|
(17,060 |
) |
|
|
(22,254 |
) |
|
|
(4,977 |
) |
|
|
(8,709 |
) |
|
Interest income
(expense), net |
|
|
(51 |
) |
|
|
(1,302 |
) |
|
|
(64 |
) |
|
|
224 |
|
|
Other income
(expense), net |
|
|
11 |
|
|
|
(287 |
) |
|
|
(15 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before benefit
from income taxes |
|
|
(17,100 |
) |
|
|
(23,843 |
) |
|
|
(5,056 |
) |
|
|
(8,485 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for
(benefit from) income taxes |
|
|
— |
|
|
|
(291 |
) |
|
|
— |
|
|
|
— |
|
|
Net loss and
comprehensive loss |
|
$ |
(17,100 |
) |
|
$ |
(23,552 |
) |
|
$ |
(5,056 |
) |
|
$ |
(8,485 |
) |
|
Net loss per
share: |
|
|
|
|
||||||||||||
|
Basic and diluted |
|
$ |
(13.03 |
) |
|
$ |
(14.54 |
) |
|
$ |
(3.56 |
) |
|
$ |
(4.19 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
shares of common stock outstanding: |
|
|
|
|
||||||||||||
|
Basic and diluted |
|
|
1,312 |
|
|
|
1,620 |
|
|
|
1,420 |
|
|
|
2,024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net loss
per share: |
|
|
|
|
||||||||||||
|
Basic and diluted
(unaudited) |
|
|
$ |
(1.01 |
) |
|
|
$ |
(0.26 |
) |
||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Pro forma
weighted-average shares of common stock outstanding: |
|
|
|
|
||||||||||||
|
Basic and diluted
(unaudited) |
|
|
|
23,372 |
|
|
|
|
32,995 |
|
||||||
|
|
|
As of |
|
|
As of |
|
||||||
|
|
|
2016 |
|
|
2017 |
|
|
2018 |
|
|||
|
|
|
(in thousands) |
|
|||||||||
|
Balance Sheet Data: |
|
|
|
|||||||||
|
Cash and cash
equivalents |
|
$ |
13,416 |
|
|
$ |
85,207 |
|
|
$ |
74,600 |
|
|
Working capital |
|
|
11,031 |
|
|
|
83,452 |
|
|
|
73,904 |
|
|
Total assets |
|
|
14,176 |
|
|
|
87,029 |
|
|
|
79,777 |
|
|
Total liabilities |
|
|
7,616 |
|
|
|
2,828 |
|
|
|
3,441 |
|
|
Convertible preferred
stock |
|
|
42,996 |
|
|
|
142,969 |
|
|
|
142,969 |
|
|
Accumulated deficit |
|
|
(37,022 |
) |
|
|
(60,574 |
) |
|
|
(69,059 |
) |
|
Total stockholders’
deficit |
|
|
(36,436 |
) |
|
|
(58,768 |
) |
|
|
(66,633 |
) |
Target
Markets
|
Rapidly advance AK002 through clinical
development in EG. AK002
has secured orphan drug designation for the treatment of EG and EGE with the
FDA. They have completed a Phase 1
trial in healthy volunteers. In this trial, AK002 exhibited clear signs of
pharmacodynamic activity by depleting blood eosinophils as soon as one hour
after dosing. They are conducting a Phase 2 trial in patients with EG with
or without EGE. They believe this trial, if positive, in conjunction with a
future Phase 3 trial, will serve as the basis for demonstrating safety and
efficacy in their biologics license application (“BLA”) and market
authorization application (“MAA”) submissions. Develop AK002 for other EGIDs. EG is part of a group of related diseases
called eosinophilic gastrointestinal diseases (“EGIDs”). These include EG,
EGE and eosinophilic colitis. EGIDs share the common pathology of tissue
inflammation caused by the presence of elevated numbers of eosinophils. If
AK002 shows activity in EG, they expect to conduct clinical trials of AK002
in these related conditions. Expand opportunity to additional
eosinophilic and mast cell driven conditions. They are currently conducting clinical
trials with AK002 in other eosinophil and mast cell driven diseases,
including two Phase 1 trials in patients with ISM and SAC and a Phase 2 trial
in patients with CU. Patients in the single ascending dose portion of the
ISM trial reported improvements in mast cell related symptoms, and one
patient with cholinergic urticaria showed disease resolution for
approximately four weeks following a single 0.3 mg/kg dose. Should
these clinical trials confirm the activity of AK002 in these indications, they
plan to continue to develop AK002 in these indications. Build commercial capability and retain
rights in key markets. If
AK002 receives regulatory approval, they intend to retain the rights to it in
key markets, and plan to commercialize AK002 in both the United States and
Europe through a specialty sales force. EG and other EGIDs, ISM, CU and
SAC are severe diseases which lack effective treatments. They believe a
significant market opportunity for AK002 exists in each of these diseases. Coordinate clinical and manufacturing
process development. AK002 has been produced under
current good manufacturing practices at commercial scale utilizing the
commercial process at Lonza Sales AG (“Lonza”), a contract development
manufacturing organization. They have signed an agreement with Lonza for BLA
activities. |
Company's
Unique Strengths
Siglec-8 is an inhibitory receptor
located selectively on eosinophils, mast cells and, to a lesser extent, on
basophils.
Because Siglec-8 is expressed in high abundance only on eosinophils
and mast cells, it presents a novel way to selectively target these important
immune cells. As an inhibitory receptor, the natural function
of Siglec-8 is to counteract activating signals within eosinophils
and mast cells that lead to an inflammatory response. By binding
to Siglec-8, AK002 is able to selectively target eosinophils and mast
cells to resolve inflammation.
AK002 selectively targets both eosinophils
and mast cells, which are types
of white blood cells that are widely distributed in the body and play a central
role in the inflammatory response. Inappropriately activated eosinophils and
mast cells have been identified as key drivers in a number of severe diseases
affecting the gastrointestinal tract, eyes, skin, lungs and other organs. As
such, AK002 has the potential to treat a large number of severe diseases.
Despite the knowledge that eosinophils and
mast cells drive many pathological conditions, there are no approved therapies
that selectively target both eosinophils and mast cells. Current treatments for
the diseases they are pursuing are non-selective and often come with
serious side effects that make them unsuitable for long term use. AK002 binds to Siglec-8, an inhibitory receptor
found on eosinophils and mast cells, which represents a novel way to
selectively deplete or inhibit these important immune cells and thereby resolve
inflammation. They believe AK002 is the only Siglec-8 targeting
antibody currently in clinical development and has the potential to be an
alternative to current treatments.
They have shown that AK002 depletes
eosinophils and inhibits mast cell activation in Phase 1 clinical trials. In a randomized, double-blind,
placebo-controlled Phase 1 trial in 51 healthy volunteers, all doses of AK002
resulted in complete depletion of blood eosinophils within one hour after
administration. The duration of depletion was dose-dependent, with a single
dose of 1.0 mg/kg of AK002 suppressing eosinophils for up to 84 days. In
addition, in the single dose portion of a Phase 1 trial in 13 patients
with ISM, a disorder characterized by an increased number of mast cells
throughout the body and symptoms related to mast cell activation, patients
reported marked improvement in ISM mast cell related symptoms and blood
eosinophils were depleted.
Company's
Unique Risks
They are in the early stages of clinical drug
development and have a very limited operating history and no products approved
for commercial sale, which may make it difficult for you to
evaluate their current business and predict their future success and viability.
They have incurred significant net losses
since inception and they expect to continue to incur significant net losses for
the foreseeable future. They have incurred
net losses in each reporting period since their inception, have not generated
any revenue to date and have financed their operations principally through
private placements of their preferred stock. Their net loss was $23.6 million
for the year ended December 31, 2017 and $8.5 million for the three months
ended March 31, 2018. As of March 31, 2018, they had an accumulated deficit
of $69.1 million.
Even if this offering is successful, they
will require substantial additional capital to finance their operations.
If they are unable to raise such
capital when needed, or on acceptable terms, they may be forced to delay,
reduce and/or eliminate one or more of their research and drug development
programs or future commercialization efforts.
They are dependent on the success of their
lead compound, AK002, which is currently in multiple clinical trials. If they are unable to obtain approval for and
commercialize AK002 for one or more indications in a timely manner, their
business could be materially harmed.
The outcome of preclinical testing and early
clinical trials may not be predictive of the success of later clinical trials, and the results of their clinical trials may not
satisfy the requirements of the FDA or comparable foreign regulatory
authorities.
Any drugs they develop may become subject to
unfavorable third-party reimbursement practices and pricing regulations.
Their clinical trials may reveal significant
adverse events, toxicities or other side effects and may result in a safety
profile that could inhibit regulatory approval or market acceptance of any of
their product candidates
If they are unable to obtain or protect
intellectual property rights, they may not be able to compete effectively in
their market.
They rely on third parties to conduct their
clinical trials and those third parties may not perform satisfactorily,
including failing to meet
deadlines for the completion of such trials, research and studies.
They contract with third parties for the
production of their product candidates for preclinical studies and, in the case
of AK002, their ongoing clinical trials, and expect to continue to do so for
additional clinical trials and ultimately for commercialization. This reliance on third parties increases the risk
that they will not have sufficient quantities of their product candidates or
drugs or such quantities at an acceptable cost, which could delay, prevent or
impair their development or commercialization efforts.
They may not gain the efficiencies they
expect from further scale-up of manufacturing of AK002, and their
third-party manufacturers may be unable
to successfully scale-up manufacturing in sufficient
quality and quantity for AK002 or their other product candidates, which could
delay or prevent the conducting of their clinical trials or the development or
commercialization of their other product candidates. Their third-party manufacturer, Lonza, is currently
manufacturing AK002 at a scale that is sufficient for them to complete their planned
clinical trials and, if they receive marketing approval, to commercialize AK002
for the indications they are currently targeting. However, they may consider
increasing the batch scale to gain cost efficiencies. If Lonza is unable
to scale-up the manufacture of AK002 at such time, they may not gain
such cost efficiencies and may not realize the benefits that would typically be
expected from further scale-up of manufacturing of AK002.
The manufacture of biologics is complex and
their third-party manufacturers may encounter difficulties in production. If any of their third-party manufacturers encounter
such difficulties, their ability to provide adequate supply of their product
candidates for clinical trials or their products for patients, if approved,
could be delayed or prevented.
Their principal stockholders and management
own a significant percentage of their stock and will be able to exert
significant control over matters subject to stockholder approval. Upon the closing of this offering and the
proposed concurrent private placement, their executive officers, directors,
holders of 5% or more of their capital stock and their respective affiliates
will beneficially own approximately 74.3% of their outstanding voting stock.
These stockholders may be able to determine all matters requiring stockholder
approval. Certain of their existing stockholders, including certain
stockholders affiliated with their directors and that beneficially own more
than 5% of their outstanding common stock, have indicated an interest in
purchasing approximately $35.0 million in shares of their common stock in
this offering at the initial public offering price. The previously
discussed ownership percentage upon completion of this offering does not
reflect the potential purchase of any shares in this offering by such
stockholders.
Bottom Line
They are an
early clinical stage biopharmaceutical company and, as such, have no revenues
from the sale of any of their product candidates. AK002 selectively targets
both eosinophils and mast cells, which are types of white blood cells that are
widely distributed in the body and play a central role in the inflammatory
response. AK002 has the potential to treat a large number of severe diseases.
They are developing AK002 for the treatment of eosinophilic gastritis (“EG”)
and eosinophilic gastroenteritis (“EGE”). In addition, they are conducting
studies in ISM, chronic urticaria (“CU”) and severe allergic conjunctivitis
(“SAC”) and are evaluating additional indications for future development. They
have shown that AK002 depletes eosinophils and inhibits mast cell activation in
Phase 1 clinical trials. They are currently testing AK002 in a double-blind,
placebo-controlled Phase 2 trial in patients with EG with or without
eosinophilic gastroenteritis (“EGE”). AK002 is being tested in an open-label
Phase 2 trial in patients with CU and in a Phase 1 trial in patients with SAC.
They expect to report top-line data from these three trials in ISM,
CU and SAC patients in the first quarter of 2019. They have prioritized their
AK002 development efforts based on their assessment of the probability of
clinical and regulatory success, unmet medical need and potential market
opportunity.
The estimated
prevalence of EG in the United States is approximately 20,000 to 25,000
patients, and the estimated prevalence of EGE in the United States is
approximately 25,000 patients, and they believe these diseases may be
significantly underdiagnosed based on their conversations with
gastroenterologists. Approximately 30,000 patients in the United States suffer
from ISM. They estimate that approximately 200,000 patients with severe CSU,
cholinergic urticaria and symptomatic dermatographism could be candidates for
therapy with AK002. They believe that approximately 50,000 to 150,000
patients in the United States suffer from severe AKC, VKC or PAC and could be
candidates for treatment with AK002.
AK002 has
secured orphan drug designation for the treatment of EG and EGE with the FDA.
They are conducting a Phase 2 trial in patients with EG with or without EGE.
They believe this trial, if positive, in conjunction with a future Phase 3
trial, will serve as the basis for demonstrating safety and efficacy in their
biologics license application (“BLA”) and market authorization application
(“MAA”) submissions. If AK002 shows activity in EG, they expect to conduct
clinical trials of AK002 in related conditions, including EG, EGE and
eosinophilic colitis. They are currently conducting clinical trials with AK002
in other eosinophil and mast cell driven diseases, including two Phase 1 trials
in patients with ISM and SAC and a Phase 2 trial in patients with CU. Should
these clinical trials confirm the activity of AK002 in these indications, they
plan to continue to develop AK002 in these indications. If AK002 receives
regulatory approval, they intend to retain the rights to it in key markets, and
plan to commercialize AK002 in both the United States and Europe through a
specialty sales force. AK002 has been produced under current good manufacturing
practices at commercial scale utilizing the commercial process at Lonza Sales
AG (“Lonza”), a contract development manufacturing organization. They have
signed an agreement with Lonza for BLA activities.
By binding
to Siglec-8, AK002 is able to selectively target eosinophils and mast
cells to resolve inflammation. AK002 has the potential to treat a large number
of severe diseases. They believe AK002 is the only Siglec-8 targeting
antibody currently in clinical development and has the potential to be an
alternative to current treatments. In a randomized, double-blind,
placebo-controlled Phase 1 trial in 51 healthy volunteers, all doses of AK002
resulted in complete depletion of blood eosinophils within one hour after
administration. In the single dose portion of a Phase 1 trial in
13 patients with ISM, a disorder characterized by an increased number of
mast cells throughout the body and symptoms related to mast cell activation,
patients reported marked improvement in ISM mast cell related symptoms and blood
eosinophils were depleted.
They are in
the early stages of clinical drug development and have a very limited operating
history and no products approved for commercial sale. They have incurred
significant net losses since inception and they expect to continue to incur
significant net losses for the foreseeable future. As of March 31, 2018, they
had an accumulated deficit of $69.1 million. Even if this offering is
successful, they will require substantial additional capital to finance their
operations. If they are unable to raise such capital when needed, or on
acceptable terms, they may be forced to delay, reduce and/or eliminate one or
more of their research and drug development programs or future
commercialization efforts. They are dependent on the success of their lead
compound, AK002, which is currently in multiple clinical trials. The outcome of
preclinical testing and early clinical trials may not be predictive of the
success of later clinical trials, and the results of their clinical trials may
not satisfy the requirements of the FDA or comparable foreign regulatory
authorities. Any drugs they develop may become subject to unfavorable
third-party reimbursement practices and pricing regulations. Their clinical
trials may reveal significant adverse events, toxicities or other side effects
and may result in a safety profile that could inhibit regulatory approval or
market acceptance of any of their product candidates. If they are unable to
obtain or protect intellectual property rights, they may not be able to compete
effectively in their market. They rely on third parties to conduct their
clinical trials and those third parties may not perform satisfactorily. They
contract with third parties for the production of their product candidates for
preclinical studies and, in the case of AK002, their ongoing clinical trials,
and expect to continue to do so for additional clinical trials and ultimately
for commercialization. They may not gain the efficiencies they expect from
further scale-up of manufacturing of AK002, and their third-party manufacturers
may be unable to successfully scale-up manufacturing in
sufficient quality and quantity for AK002 or their other product candidates,
which could delay or prevent the conducting of their clinical trials or the
development or commercialization of their other product candidates. They may
consider increasing the batch scale to gain cost efficiencies. If Lonza is
unable to scale-up the manufacture of AK002 at such time, they may
not gain such cost efficiencies and may not realize the benefits that would
typically be expected from further scale-up of manufacturing of
AK002. The manufacture of biologics is complex and their third-party
manufacturers may encounter difficulties in production. Upon the closing of
this offering and the proposed concurrent private placement, their executive
officers, directors, holders of 5% or more of their capital stock and their
respective affiliates will beneficially own approximately 74.3% of their
outstanding voting stock. Certain of their existing stockholders, including
certain stockholders affiliated with their directors and that beneficially own
more than 5% of their outstanding common stock, have indicated an interest in
purchasing approximately $35.0 million in shares of their common stock in
this offering at the initial public offering price. Rating = 3.