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New Enterprise Associates, Armistice Capital Among Funds Buying Up Biotech

The biotechnology sector, a darling of investors just three years ago, has fallen prey to many of the same market conditions, such as high interest rates, stubborn inflation, disjointed valuations and geopolitical unrest, that have plagued virtually every industry vertical the past 18 months.

But everyone knows you don’t buy high and sell low, and several prominent funds, including New Enterprise Associates and Armistice Capital, have increased their position on a number of biotechnology stocks in the last several months.

Gossamer Bio Inc., a clinical-stage biopharmaceutical company focused on the development and subsequent commercialization of seralutinib (a protein blocker that helps inhibit abnormal cellular growth) for the treatment of pulmonary arterial hypertension, is one company several funds are keen on.

Gossamer entered into a securities purchase agreement with various institutional and accredited investors to sell securities via private placement for gross proceeds of $212 million (before placement agent and offering expenses).

Among the investors are New Enterprise Associates, Nantahala, Samsara BioCapital, SilverArc Capital, Boxer Capital, Invus, Armistice Capital, and Rock Springs Capital.

The details of the private investment saw Gossamer sell 129,869,440 shares of common stock and accompanying warrants to buy 32,467,360 shares of common stock at a combined price of $1.63 per share for common stock and accompanying warrant and $1.85 per share and accompanying warrant for participating officers and directors. The warrants have an exercise price of $2.04 per share of common stock, and will be exercisable immediately with an expiration of July 24, 2028.

“We are grateful for the support from this investor syndicate and thrilled to embark on the registrational Prospera Phase 3 trial, the next step toward bringing seralutinib to patients with [pulmonary arterial hypertension],” Faheem Hasnain, co-founder, chairman and CEO of Gossamer, said in a statement to Yahoo Finance in late July.

The company intends to use the funds from the private placement to provide capital for development processes and, as referenced above, the commercialization of seralutinib as well as for general corporate spending and working capital.

Cancer Vaccines

IO Biotech, a company headquartered in Copenhagen, Denmark, with its U.S. headquarters in New York City, is a clinical biopharmaceutical company that aspires to create “novel, immune-modulating cancer vaccines based on its T-win technology platform,” is another company several funds have increased their positions on in recent months.

In another private placement, the company is hoping to see gross proceeds of approximately $75 million before deducting offering expenses. The fundraising includes both new and existing investors, including Kurma Growth Opportunities Fund, Novo Holdings, Logos Capital, Pivotal Life Sciences, The Red Hook Fund, and Armistice Capital, among others.

Under the securities purchase agreement, the investors agreed to purchase 37,065,647 shares of the company’s common stock and accompanying warrants to buy up to an aggregate of 37,065,647 shares of common stock at a combined purchase price of $2.02 per share (and accompanying warrant). Each accompanying warrant will represent the right to purchase one share of the company’s common stock at an exercise price of $2.47 per share. The warrants will be exercisable for a period of three years and six months following the date of issuance, according to a release from IO Biotech in August 2023.

“The continued strong support that we have received from our existing investors and the enthusiasm from an impressive group of new health care investors are testaments to the potential of IO102-IO103 [vaccines], to the strength of the data generated to date from the Phase 1/2 study in metastatic melanoma and from our ongoing Phase 2 basket study (IOB-022/KND38),” Mai-Britt Zocca, president and CEO of IO Biotech, said in a statement. “With the proceeds of this financing, we expect to have sufficient capital to fund our operations into the fourth quarter of 2025, supporting the continued development of IO102-IO103 through critical clinical milestones from our pivotal Phase 3 trial in first-line advanced melanoma, as well as from our Phase 2 studies.”

Mental and Women’s Health

Compass Pathways is a biotech company that wants to “accelerate” patient access to “evidence-based innovation in mental health.” The company hopes to do this via a new model of psilocybin therapy in which their proprietary formulation of synthetic psilocybin (known as Comp360), is administered in addition to psychological support for patients.

Compass is looking to push its product through the pivotal Phase 3 program in treatment-resistant depression. That will require money — $285 million, as the company secured that amount in this funding round. The lead investors in this round were lead investor TCGX, Vivo Capital, RA Capital, Surveyor Capital, Paradigm BioCapital Advisors, Soleus Capital, Armistice Capital, Logos Capital, and others.

Another European biopharmaceutical company, Belgian concern Mithra Pharmaceuticals, is also garnering attention. The company aims to expand offerings and options for women with regard to contraception and menopause. The goal, the company has stated, is to “meet women’s needs throughout their life span.”

The company launched the first estetrol-based contraceptive pill, Estelle, in 2021, and is now moving its focus to a product called Donesta, which is being billed as a next-generation hormone therapy.

Once again, investors saw some opportunity. Armistice Capital, in particular, increased its position in the company to 14.58% of total shares in Mithra (about 10 million shares in all).

Armistice Capital likely sees that in addition to developing its own product, Mithra is a partner for a broad variety of solutions regarding early drug development for other manufacturers, as well as clinical batches and commercial manufacturing of complex polymeric products (such as vaginal rings and implants) and complex liquid injectables and biologicals (such as pre-filled syringes and cartridges).

As evidenced by the above, there’s no shortage of medical maladies to cure. The above companies, and the investors who provide their capital, are taking a chance with their products, but a chance that could pay huge dividends both for said investors as well as those who can utilize their care.