IPO Update: bioAffinity Technologies Readies $10 Million IPO

Summary

• bioAffinity Technologies has filed proposed terms for a $10 million IPO.
• The firm is developing diagnostics tests, including its lead test for detection of lung cancer.
• BIAF is still a long way from possible marketing approval for its lead test, so I'm on Hold for the IPO.
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A Quick Take On bioAffinity Technologies

bioAffinity Technologies (NASDAQ:BIAF) (BIAFW) intends to raise $10 million from the sale of its common stock and warrants in an IPO, according to an amended registration statement.

The company is seeking to develop and commercialize a lung cancer diagnostic test and other tests for serious health conditions.

Given the firm's stage of development and long time frame to commercialization, I'm on Hold for the IPO.

bioAffinity Technologies Overview

San Antonio, Texas-based bioAffinity was founded to develop various diagnostic tests of health conditions for patients in the United States.

Management is headed by Founder, President and CEO, Maria Zannes, J.D., who has been with the firm since inception in 2014 and was previously President of the Energy Recovery Council, a national trade group for the waste-to-energy industry.

The firm's lead test under development is the CyPath Lung test designed to determine the presence of lung cancer cells in a patient's sputum.

The firm has produced an initial run of 3,000 patient collection kits through an agreement with GO2 Partners, but has recognized no revenue to-date.

bioAffinity has booked fair market value investment of $17.3 million as of December 31, 2021, from investors including The Harvey Sandler Revocable Trust, Nathan Perlmutter, and others.

bioAffinity's Market & Competition

According to a 2021 market research report by Fortune Business Insights, the global market for lung cancer screening was an estimated $2.6 billion in 2020 and is forecast to reach $4.85 billion by 2028.

This represents a forecast CAGR (Compound Annual Growth Rate) of CAGR of 8.1% from 2021 to 2028.

Key elements driving this expected growth are a growth in the incidence of lung cancer due to continued widespread consumption of tobacco products and advancements in screening options for patients.

Also, the outbreak of the Covid-19 pandemic slowed growth of the industry as lockdowns reduced the number of persons screened for lung cancer.

Major competitive vendors that provide or are developing related treatments include:

• LungLife AI

• SanMed Biotech

• Biodesix

• Veracyte

bioAffinity Technologies' Financial Status

The firm's recent financial results show no product sales 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:

Statement of Operations (SEC EDGAR)

As of March 31, 2022, the company had $1.0 million in cash and $14.0 million in total liabilities.

bioAffinity Technologies' IPO Details

BIAF intends to sell 1.5 million units of common stock and one warrant per share at a proposed midpoint price of $6.75 per share for gross proceeds of approximately $10.1 million, not including the sale of customary underwriter options.

No existing or potentially new shareholders have indicated an interest to purchase shares at the IPO price.

Included in the units will be one warrant, exercisable at 120% of the IPO price immediately upon receipt of the warrant. The warrants will trade under the symbol "BIAFW".

Assuming a successful IPO at the midpoint of the proposed price range, the company's enterprise value at IPO (excluding underwriter options) would approximate $52 million.

The float to outstanding shares ratio (excluding underwriter options) will be approximately 16.6%. A figure under 10% is generally considered a 'low float' stock which can be subject to significant price volatility.

Per the firm's most recent regulatory filing, it plans to use the net proceeds as follows:

We intend to use the net proceeds from this offering for working capital and for general corporate purposes, which may include product and test development, general and administrative matters, and capital expenditures. [...] We expect the proceeds from this Offering together with anticipated sales of our diagnostic LDT test should be sufficient for the Company to complete the de novo pivotal clinical trial and, if results are positive, to submit and obtain FDA marketing authorization of CyPath® Lung for sale and enter the EU market for sale of CyPath® Lung as a CE-marked IVD test.

(Source)

Management's presentation of the company roadshow is not available.

Regarding outstanding legal proceedings, management said the firm has no 'material pending legal proceedings.'

The sole listed bookrunner of the IPO is WallachBeth Capital.

Commentary About bioAffinity Technologies

BIAF is seeking U.S. public capital funding for further development of its lead diagnostic test.

The firm's lead product, its CyPath Lung test, is designed to determine the presence of lung cancer cells in a patient's sputum.

The market opportunity for lung cancer diagnostics is large and expected to grow at a reasonably fast rate over the coming years.

The firm intends to further develop the CyPath platform for detection of COPD and asthma.

Management has not disclosed any major pharma firm collaboration agreements.

The company's investor syndicate does not include any well-known institutional venture capital firms or strategic investors.

WallachBeth Capital is the sole underwriter and there is no data on the firm's IPO involvement over the last 12-month period.

The diagnostic test market is a difficult market to crack and generate profitable results quickly.

Management expects to file a pre-submission package to the FDA in Q3 2022 for its clinical trial that once approved and begun will take "between two to three years depending on the clinical trial's size, objectives and endpoints."

So, the time to market in a best-case scenario is quite long and the firm will likely require additional capital, in the form of dilutive equity or increased debt.

Given the firm's stage of development and long time frame to commercialization, I'm on Hold for the IPO.

Expected IPO Pricing Date: Week ending June 3, 2022

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such 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.