- Talaris Therapeutics has filed proposed terms for its $150 million IPO.
- The firm is developing stem cell-based technologies for kidney and other organ transplants.
- TALS has produced impressive efficacy results in mid-stage trials and the IPO appears reasonably priced, so it is worth a close look for life science investors.
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The firm is developing kidney and stem cell transplantation technologies.
TALS has shown strong clinical trial results and the IPO appears reasonably valued.
For life science investors with a patient hold time frame, my opinion is a BUY at up to $17.00 per share.
Company and Technology
Louisville, Kentucky-based Talaris was founded to create an improved...
... method of allogeneic hematopoietic stem cell transplantation with the potential to transform the standard of care in solid organ transplantation, certain severe autoimmune diseases, and certain severe non-malignant blood, immune, or metabolic disorders.
Management is headed by president and CEO Scott Requadt, who has been with the firm since November 2018 and was previously Managing Director of Clarus Ventures, a biotech venture capital firm acquired by Blackstone Group.
Below is a brief overview video of Talaris Therapeutics by CEO Requadt:
Source: Alliance for Regenerative Medicine
The firm's lead candidate, FCR001, is a cell therapy that includes stem and immune cells that are provided by "a healthy donor, who is also the organ donor in the case of organ transplantation." (Source)
Below is the current status of the company’s drug development pipeline:
Source: Company SEC Filing
Investors in the firm have invested at least $57 million in equity investment and include Blackstone, Longitude Venture Partners, Qiming Ventures, Citadel and Viking Global Opportunities.
Market and Competition
According to a 2021 market research report by Grand View Research, the global stem cell market size was an estimated $9.4 billion in 2020 and is expected to reach $18 billion by 2028.
This represents a forecast CAGR (Compound Annual Growth Rate) of 8.8% from 2021 to 2028.
Key elements driving this expected growth are a growing demand for biologics, continued technological development in stem cell therapies and higher growth in developing personalized medicine approaches to patient care.
Also, the allogeneic therapy approach accounted for the majority of global market share in 2020, as the chart shows below:
Major competitive vendors that provide or are developing related treatments include:
Acceleron Pharma (XLRN)
Corbus Pharmaceuticals (CRBP)
Horizon Therapeutics (HZNP)
Kadmon Holdings (KDMN)
Other stem cell technology developers
Talaris’s recent financial results are typical of a clinical stage biopharma firm in that they feature no revenue and significant R&D and G&A expenses associated with its development efforts.
Below are the company’s financial results for the past two calendar years:
Source: Company registration statement
As of December 31, 2020, the company had $17.6 million in cash and $4.8 million in total liabilities.
Talaris intends to raise $150 million in gross proceeds from an IPO of its voting common stock, offering 8.8 million shares at a proposed midpoint price of $17.00 per share.
The company will have voting and non-voting classes of stock, with the non-voting class able to convert its shares into voting shares according to the prospectus requirements.
No existing shareholders have indicated an interest to purchase shares at the IPO price.
Assuming a successful IPO, the company’s enterprise value at IPO (ex. underwriter options) would approximate $415 million, excluding the effects of underwriter over-allotment options.
Excluding effects of underwriter options and private placement shares or restricted stock, if any, the float to outstanding shares ratio will be approximately 21.4%.
Management says it will use the net proceeds from the IPO as follows:
Approximately $130.0 million for the further development of FCR001 in our ongoing Phase 3 registrational trial, FREEDOM-1, through evaluation of its primary endpoint, including in-house manufacturing and quality assurance of clinical trial material, third-party clinical trials costs, clinical development and trial management, and personnel associated with each;
Approximately $40.0 million for the continued research and development of FCR001 in additional pipeline programs such as living donor kidney transplant delayed tolerance induction and scleroderma in our FREEDOM-2 and FREEDOM-3 trials, respectively, through evaluation of their primary endpoints, including in-house manufacturing and quality assurance of clinical trial material, third-party clinical trials costs, clinical development and trial management, and personnel associated with each;
Approximately $30.0 million for the development of expanded CMC operations to facilitate scale-up and commercialization of FCR001;
Approximately $25.0 million to fund the development of our preclinical programs towards IND filings and/or into clinical trials; and
the remainder for working capital and other general corporate purposes.
Based on our current plans, we believe that our existing cash, cash equivalents and marketable securities, together with the net proceeds from this offering, will be sufficient to enable us to fund our operating expenses and capital expenditure requirements at least into 2025.
Management’s presentation of the company roadshow is available here.
Listed bookrunners of the IPO are Morgan Stanley, SVB Leerink, Evercore ISI and Guggenheim Securities.
Talaris is seeking U.S. capital market funding to advance its mid-stage and preclinical programs into late stage and initial clinical trials.
The firm’s lead candidate, FCR001, is being developed to improve the transplantation process for living kidney donor transplant efforts.
The market opportunity for stem cell development is large and expected to grow at nearly a 9% CAGR through 2028, which represents a strong growth trajectory.
Management has disclosed no major pharma collaboration agreements, so is pursuing a go-it-alone approach at this time.
The company’s investor syndicate includes the former Clarus Ventures (now Blackstone), an experienced biotech venture capital investor.
Morgan Stanley is the lead left underwriter and IPOs led by the firm over the last 12-month period have generated an average return of 32.9% since their IPO. This is a mid-tier performance for all major underwriters during the period.
As for valuation, management is asking IPO investors to pay an enterprise value of $415 million, which is within the typical range for a clinical stage biopharma firm.
In its trials to-date, management has noted that "26 of 37 (living donor kidney transplant) patients treated with FCR001 (70%) were able to completely discontinue their chronic immunosuppression approximately one year after receiving their transplant."
So, the firm’s trial results to-date have been quite impressive.
For life science investors with a patient hold time frame, the IPO is worth consideration.
Expected IPO Pricing Date: May 6, 2021
This article was written by
Donovan Jones is a research specialist with 15 years of experience identifying opportunities for IPOs and software companies.
He also leads the investing group
which offers: actionable information on growth stocks through first look S-1 filings, previews on upcoming IPOs, an IPO calendar for tracking what’s on the horizon, a database of U.S. IPOs, and a guide to IPO investing to walk you through the entire IPO lifecycle - from filing to listing to quiet period and lockup expiration dates.
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