IPO Alert: What to look for when Ocean Biomedical goes public

After tech start-ups, the biotechnology industry is keeping the IPO market busy nowadays. It is estimated that Wall Street is headed for a record year in terms of public listings. Among the latest IPO aspirants, Ocean Biomedical Inc. this week revised the terms of its upcoming stock market debut, bringing about a sharp reduction in valuation.

6.25 Mln shares

Earlier, the Rhode Island-headquartered preclinical biotechnology firm had revealed plans to list on the Nasdaq stock market under the ticker symbol OCEA. As per the revised SEC filing, the company now intends to offer 6.25 million shares, which is nearly double the number it had proposed earlier. Ocean Biomedical was founded in 2019 by Dr. Jack Elias, Dr. Jonathan Kurtis, and Dr. Chrinjeev Kathuria.

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The IPO price has been revised down to the range of $7 per share to $9 per share from the original price of $14-$17 apiece. The group of book-runners is led by Berenberg Bank and Oppenheimer & Co. The proceeds expected from the offering have remained unchanged even after the revision. But, it would now value the company at $288 million, down 43% from the valuation originally estimated. The proceeds will mainly be used for the development of existing candidates and acquisition of new candidates to expand the portfolio.

Unique Model

Ocean Biomedical collaborates with leading research universities to develop and license therapies for various ailments, primarily cancer, fibrosis, and inflammation. The unique model helps it identify the inventions created at such institutions, which might otherwise go unnoticed, and use them for the benefit of patients. The arrangement is expected to help in building a continuous pipeline of products for the treatment of various diseases.

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Programs in oncology and fibrosis are based on exclusive licenses with Brown University, while those in infectious diseases are based on exclusive licenses with Rhode Island Hospital. Inflammation programs are based on a nonexclusive license with Stanford University. Since there are no other known licensees for the programs, the management expects to bring some of the preclinical product candidates to the market in one-and-half years.

The key factors that differentiate the company are its diverse portfolio, the process of harnessing inventions from research universities and medical centers for clinical use, and the development of new drugs through a milestone-driven approach.   

Risks

Currently, the main risk facing the company is its extensive reliance on licensing agreements with Brown University, Rhode Island Hospital, and Stanford University. Also, it is part of an industry that is highly competitive. Like all biotechnology firms, high costs and uncertainties related to drug development programs might delay the generation of product revenue that is sufficient to achieve profitability.  

The company did not generate any revenue in the three months ended March 31, 2021. Research & development costs were $25.4 million, which resulted in a wider loss of $43.9 million or $1.15 per share.