NantKwest's Record-breaking $2.6-billion IPO Valuation

Patrick Soon-Shiong is already a big name in the biotech industry. In June 2010, Celgene (NASDAQ:CELG) acquired Soon-Shiong’s company, Abraxis BioScience, for approximately $2.9 billion worth of Celgene shares. Soon-Shiong later resurfaced at Conkwest, a small immuno-oncology company — he bought in, changed the company’s name to NantKwest, and stepped in as CEO. The rest is history — or at least the beginning of an exciting future.
NantKwest (NASDAQ:NK) hit the stock market on Tuesday with an initial public offering (IPO) that values the company at $2.6 billion. Bloomberg reported that NantKwest raised $207 million through its IPO, bringing its valuation up to $3.97 billion. Over the course of the day, the company’s share price increased 39 percent to reach $34.64. At the same time as the IPO was conducted, Soon-Shiong extended his relationship with Celgene, selling $17 million worth of NantKwest shares in a private placement.

A better cancer treatment

NantKwest researches natural killer cells as a safer alternative to existing cancer treatments. According to Fierce Biotech, the company believes it can use a PD-L1 antibody to coordinate a natural killer cell and T cell attack on cancer cells.
This system has several key advantages. Unlike the CAR-T therapies being pursed by biotech competitors like Juno Therapeutics (FRA:2JT) and Kite Pharma (NASDAQ:KITE), NantKwest’s proposed treatments are safe for use on solid tumors because they don’t attack normal cells. Furthermore, natural killer cells can be grown and injected in patients and do not require extraction, making them a relatively over-the-counter solution (unusual in the realm of customized immuno-therapy drugs).

CEO reputation drives investor confidence

Despite the optimism about NantKwest’s proposed therapeutics, the company has spent relatively little on research. When it filed for an IPO, it had only spent $60 million on research, a tiny fraction of its current market cap. However, investors don’t appear particularly concerned by this limited spending. Indeed, The Wall Street Journal states that NantKwest had the highest ever IPO valuation for a biotech company with no approved drugs.
NantKwest is currently completing the first phase of clinical trials for a treatment targeting cancer and infectious diseases. Some skeptics might think that investing in a biotech company that is in the very early stages of drug development is a foolhardy investment. But thus far it seems that the overall promise of the immunotherapeutics market, coupled with the strength of Soon-Shiong’s reputation, is enough to reassure early investors that the CEO’s golden streak will continue with NantKwest.

NantKwest’s success indicative of broader biotech growth

NantKwest’s IPO comes at a time of growth for the biotech industry. Bloomberg reported that the NASDAQ Biotechnology index (INDEXNASDAQ:NBI) has climbed by 48 percent in the past year, while the S&P 500 index (INDEXSP:.INX) has only grown by 4.5 percent. The Wall Street Journal suggests that this exceptional growth in the biotech industry stems from low interest rates and lackluster growth in safer investments. Regardless of the reason, biotech is experiencing an era of rapid growth, progress and innovation, rendering it a very appealing option for bold investors.
 

Securities Disclosure: I, Morag McGreevey, hold no direct investment interest in any company mentioned in this article.