Aduro’s gain is Advaxis’s pain

A spectacularly mispriced flotation or just another US biotech bubble indicator? The case of Aduro Biotech, whose stock climbed 147% on its first day’s trading yesterday, is probably a mixture of the two, but a couple of apparently unrelated events also helped propel the company to a valuation that now stands at $2.5bn.

Biotech watchers will also have had an eye on Advaxis, a US group developing a similar technology, which some had hoped would trade up in tandem with Aduro. In the event, Advaxis finished yesterday nursing a loss of 12%.

Advaxis’s stock had climbed some 42% in the five days before. The similarity between Advaxis and Aduro lies in their respective use of Listeria monocytogenes as a technology for drug development, effectively using a modified form of the bacterium as a delivery vehicle for specific antigens.

Aduro calls its technology LADD. This uses two gene deletions to eliminate the bacterium’s virulence, followed by modification with new genetic material to encode and express specific tumour antigens. The lead LADD asset is CRS-207, in phase II for pancreatic cancer and phase I for mesothelioma, while ADU-623 is in phase I studies for high-grade glioma.

Advaxis’s approach, dubbed Lm-LLO, also uses a live, attenuated Listeria strain, and to this are added copies of a plasmid encoding a fusion protein sequence that includes the antigen of interest. This fusion protein is secreted by the Listeria inside antigen-presenting cells, stimulating an immune response.

Interest in Advaxis might also have been piqued by news that it would feature in two late-breaking presentations at the upcoming AACR meeting, one on combining its technology with Ox40 and GITR-targeting Abs, and the other concerning Her2/Neu-expressing Lm-LLO.

No mass Listeria

However, the enthusiasm behind Aduro surely had less to do with LADD than with its other technology, which focuses on Sting, a protein complex thought to play a key role in innate immunity, and in detecting and destroying tumour cells.

Sting was the focus of a major alliance that Aduro struck with Novartis less than three weeks ago, worth $200m up front plus a $25m equity stake (Pre-IPO Sting gives Novartis a stake in Aduro, March 30, 2015). This clearly served to endorse the float and reduce risk, prompting investors to pile in.

A second relevant event occurred on the day of the IPO, when a study was published in Science magazine supporting the use of Sting agonists in PD-1 blockade-resistant tumours.

Aduro had planned to raise $86m by floating at $14-16 per share, but in fact raised $137m before costs at $17 per share. Remarkably its 147% first-day climb beat the hugely hyped flotations of the CAR-T stocks Juno and Bellicum last year – these had enjoyed 46% and 26% increases on their respective first days.

As well as the banks managing the Aduro float, which collected over $10m of fees, Novartis is an obvious winner; the Swiss company’s stake is worth 147% more today than it was yesterday.

True, Aduro might be kicking itself for not going out and raising more, and in a normal market a 147% rise would be a clear signal of serious mispricing of an IPO. But then with almost $500m in the bank, including the Novartis payment and existing cash, Aduro is hardly undercapitalised.

To contact the writer of this story email Jacob Plieth in London at [email protected] or follow @JacobPlieth on Twitter

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