With a Collaboration Deal in Place with Merck, Cue Biopharma Plans $60 Million IPO

Cue BioPharma is on a roll, having recently signed a deal with Merck and is planning an initial public offering (IPO) to raise up to $60 million.

Cue is working to develop a novel class of biologics that selectively modulate the immune system to treat cancers and autoimmune disorders. On Nov. 16, Cue announced a strategic research collaboration and license deal with Merck. Under the terms of the agreement, Cue will use its tech platform to develop biologics for selectively modulate disease-relevant T cells for autoimmune diseases. Full financial details weren’t disclosed, but Merck paid an upfront fee and Cue is eligible for up to $374 million in milestone payments, as well as tiered royalties on any sales of products coming out of the collaboration.

The company’s lead candidate, CUE-101, targets cancers driven by Human Papilloma Viruses (HPV). It’s still in the IND-enabling stage. The company had several other compounds in various preclinical stages of development for cancer and autoimmune and inflammatory diseases.

Donovan Jones, writing for Seeking Alpha, examines the company in terms of its upcoming IPO. He notes that the Merck deal has three positives going for the IPO—a major pharmaceutical company thinks its platform is worth investing in, it potentially provides deep funding for future development costs, and it brings expertise in development and commercialization.

Although the oncology biologics market is huge, expected to hit $87.6 billion by 2024, it’s a market clogged with major competitors, including Amgen, Roche, Novartis, Juno Therapeutics, Bristol-Myers Squibb, Merck, Pfizer and others. It’s also an area ripe with collaboration opportunities, however, because oncology combination therapeutics is a big area of development at the moment.

Donovan writes, "Management says that the ‘relative effectiveness of immunotherapies depends on whether a relevant or optimal therapeutic mechanism to engage the immune system has been addressed by the therapy, and it is likely that different immune stimulatory mechanisms will be required to optimally address certain cancers over others.’ As such, it is likely the firm would have to develop specific immunotherapies for each disease indication, or license its technologies to other firms outside its primary areas of expertise and focus."

Company filings with the U.S. Securities and Exchange Commission (SEC) indicate the company plans to raise $60 million from its IPO. It has a minimum floor of $40 million. As of Sept. 30, 2017, the company had $3.4 million in cash. So it needs money, and as a biotech company with no products, has no revenue.

If Cue raises the money it hopes to, $27 to $29 million will go toward ongoing research and development of its pipeline and platform technologies. Another $5 to $7 million will go to patent portfolio development and business and administrative activities. Cue’s filing stated, "We believe that the net proceeds from this offering will be sufficient to allow us to: complete IND-enabling studies for our lead product candidate, file such IND and initiate the Phase I trial for that candidate; identify, optimize and nominate one additional drug candidate for immuno-oncology; optimize drug scaffold for the treatment of autoimmune indications through the generation of T regulatory cells in vivo; and continue to advance our drug discovery platform technologies, including funding to proof of concept of viraTope, our T cell epitope discovery platform."

Donovan notes that if the IPO is successful, selling 6.7 million shares at $7.50 per share, the company’s market capitalization after the IPO would be about $130 million.