Categories Health Care, IPO

Ocean Biomedical slashes IPO size. Should you invest in the stock?

The company will offer approximately two million shares for $10-12 apiece, generating proceeds of around $22 million at the mid-point of the range

The biomedical industry grew at an accelerated pace in 2021 even as healthcare systems went into overdrive amidst the COVID-induced medical emergency. The biomedical market is projected to expand steadily in the coming years, and many early-stage companies are currently pursuing IPOs to take their businesses to the next level.

The recent announcement by Ocean Biomedical, Inc. to become a public entity elicited much interest among investors, probably due to the company’s unique business model that involves tie-ups with hospitals and research universities to support the development and commercial launch of new therapies. Such partnerships help accelerate drug development programs.

Offer Downsized

In a surprise move, the pre-clinical biomedical firm this week revealed plans to reduce the size of the initial public offering by around 50%. As per the revised filing, it will offer approximately two million shares for $10-12 per share. At the mid-point of the price range, the offering would generate proceeds of around $22 million.

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After securing regulatory sanction, the shares will start trading on the Nasdaq stock exchange under the symbol OCEA later this year. The offering will be managed by Roth Capital Partners and Jones Trading. In an earlier SEC filing, the Rhode Island-based company had said it would offer 6.3 million shares in the $7-9 per share range, which would have yielded more than $50 million.

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The focus of Ocean’s therapeutic programs is oncology, fibrosis, infectious diseases, and inflammation disorders, and the company operates through partnerships with hospitals and research institutions. The preclinical pipeline includes humanized monoclonal antibodies for non-small cell lung cancer/glioblastoma multiforme and a formulation for the treatment of Idiopathic Pulmonary Fibrosis. It has also licensed a COVID-19 therapeutic, which is expected to go into phase-I and phase-II trials in the first half.

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It is not easy to evaluate the effectiveness and success of the loss-making company’s performance so far, after its inception in January 2019. The management has warned that it would continue incurring losses in the near future due to the absence of marketable products. The company would require additional capital to successfully commercialize the products and become profitable.

Financial Data

In the nine months ended September 2021, Ocean’s net loss totaled $54.2 million, which is significantly wider than the $0.77 million loss incurred in the prior-year period. The bottom-line performance was affected by a multi-fold increase in general & administrative expenses and around $30 million of research and development expenses.

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