C4 Therapeutics Proposes $150 Million IPO Terms (Pending:CCCC)


Quick Take

C4 Therapeutics (CCCC) has filed to raise $150 million in an IPO of its common stock, according to a S-1 registration statement.

The firm is a preclinical stage biopharma developing cancer and neurodegenerative treatments by creating the ability to destroy disease-causing proteins.

CCCC has created several impressive collaborations, so it appears to be creating a proprietary platform with significant promise.

However, the company is still at a preclinical development stage, so the IPO is likely more suited to long-term hold institutional investors. I’ll watch it from the sidelines.

Company & Technology

Watertown, Massachusetts-based C4 was founded to develop its TORPEDO platform which synthesizes small molecule protein degraders delivered via oral administration for the treatment of blood and other cancers.

Management is headed by president and CEO (as of registration effectiveness date) Mr. Andrew Hirsch, who has been with the firm since September 2020 and is currently a board member of Editas Medicine, a genetic biopharma firm, and was previously CFO at Agios Pharmaceuticals.

Below is a brief overview video of small molecule degraders being developed by Sanofi:

Source: Sanofi

The company’s lead candidate, CFT7455, is being developed to target multiple myeloma, peripheral T-cell lymphoma and mantle cell lymphoma. The candidate is still in preclinical development and management is expected to submit an IND (Investigational New Drug) application to the US FDA in Q4 2020 and begin Phase 1 trials in 1H 2021.

Below is the current status of the company’s drug development pipeline:

Source: Company S-1 Filing

Investors in the firm have invested at least $251 million and include Cobro Ventures, Perceptive Advisors, Cormorant Funds and RTW.

Market & Competition

According to a 2020 market research report, the global market for multiple myeloma treatments was valued at $19.5 billion in 2018 and is expected to reach an estimated $31 billion by 2026.

This represents a forecast CAGR (Compound Annual Growth Rate) of 6.0% from 2019 to 2026.

Key elements driving this expected growth are an increasing amount and pace of investment in new treatments as well as increased demand as the global population of aged persons grows along with decreased immune system function.

Also, North America currently provides the highest demand by region, with Europe emerging as the second largest market in the years ahead.

Major competitive vendors that provide or are developing treatments include:

  • Arvinas (ARVN)

  • Cullgen

  • Nurix Therapeutics (NRIX)

  • Vividion Therapeutics

  • Kymera Therapeutics (KYMR)

  • Amgen (AMGN)

  • AstraZeneca (AZN)

  • GlaxoSmithKline (GSK)

  • Genentech

  • Novartis (NVS)

Financial Status

C4’s recent financial results are atypical of preclinical stage biopharma firms in that it has received significant collaboration revenue from partners Roche, Biogen and Calico.

Through those relationships, the firm has received $154.8 million in financing, some of which it has recognized as revenue, while much of it is still on the balance sheet as unrecognized.

This represents quite large amounts for a preclinical firm and is a strong positive signal for the company’s promising technologies.

Below are the company’s financial results for the past two and ½ years (Audited PCAOB for full years):

Source: Company registration statement

As of June 30, 2020, the company had $211.6 million in cash, equivalents and short-term investments and $126.6 million in total liabilities. (Unaudited, interim)

IPO Details

C4 intends to raise $150 million in gross proceeds from an IPO of 8.824 million shares of its common stock, offered at a proposed midpoint price of $17.00 per share.

No existing shareholders have indicated an interest to purchase shares at the IPO price, a common element in life science IPOs.

Assuming a successful IPO, the company’s enterprise value at IPO would approximate $743 million, excluding the effects of underwriter over-allotment options.

Management says it will use the net proceeds from the IPO as follows:

approximately $40.0 million to complete the Phase 1 portion of our planned first-in-human Phase 1/2 clinical trial of CFT7455 for patients with MM or NHL, such as PTCL or MCL, as well as to fund a portion of the Phase 2 expansion component of that clinical trial in these indications;

approximately $56.0 million to complete the Phase 1 portion of our planned first-in-human Phase 1/2 clinical trial of CFT8634 for patients with synovial sarcoma or solid tumors with SMARCB1 loss, as well as to fund a portion of the Phase 2 expansion component of this trial and initiate a Phase 3 confirmatory clinical trial of this product candidate in synovial sarcoma;

approximately $62.0 million to conduct and complete IND-enabling studies with respect to BRAF V600E and RET, substantially complete the Phase 1 portion of our planned first-in-human Phase 1 /2 clinical trials for each of these programs and fund initial portions of our planned phase 2 expansion component for the clinical trials for each of these product candidates; and

the remainder for continued development of our TORPEDO platform and advancement and identification of additional targets and development candidates, hiring of additional personnel, capital expenditures, costs of operating as a public company and other general corporate purposes.

Management’s presentation of the company roadshow is available here.

Listed bookrunners of the IPO are Jefferies, Evercore ISI, BMO Capital Markets and UBS Investment Bank.

Commentary

C4 is seeking public capital market funding to advance its current preclinical stage programs into Phase 1 clinical trials.

The firm’s lead candidate is being developed to treat various hematologic cancers and management expects it to enter Phase 1 trials in the first half of 2021 if there are no delays.

The market opportunities for the various markets C4 is targeting are large and expected to grow materially as the global population ages and patient immune systems become less potent due to age.

Management has succeeded in developing several major pharma collaborations and has received significant collaboration revenue as a result. This speaks to the potential value of C4’s approach and proprietary platform even though its drugs are still in a preclinical stage of development.

As to valuation, management is seeking an enterprise valuation at IPO that is well above the typical $250 million to $500 million range for a biopharma firm at IPO.

This is also especially pricey given the firm’s preclinical status.

For life science investors who wish to do some ‘venture investing’ in a public company, the IPO may be worth considering, but in my opinion, it is still ultra-high-risk and more suited to long-term institutional shareholders, so I’ll watch it from the sidelines.

Expected IPO Pricing Date: October 1, 2020.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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