Cancer drug developer CG Oncology has raised $380 million in an initial public offering than was larger than it expected, a positive sign for a sector that’s struggled to generate demand from Wall Street investors recently.
The company on Wednesday sold 20 million shares in its offering — eight million more than it had expected — at $19 apiece. Shares will begin trading Thursday on the Nasdaq stock exchange under the ticker symbol “CGON.”
The offering is the biotechnology sector’s first of 2024 and could be the start of an early IPO run. CG is one of five biotech companies to reveal IPO plans since January. One other, ArriVent Biopharma, is expected to price an offering this week.
An IPO revival would be welcome news for biotech, after weathering a market downturn for much of the past two years. IPOs are an important financing step for young companies and a way of generating returns for their investors.
But they’ve been particularly difficult to pull off of late, with the number of offerings in 2022 and 2023 falling nearly 80% from their peak in 2021. Only 19 companies priced an IPO in 2023, the lowest total in at least six years, according to BioPharma Dive data.
Stock market performance has been mixed, with less than half of last year’s IPO class trading at or above their offering price. Small upticks in IPO activity in recent quarters have been followed by long dry spells. Before CG’s offering, the last biotech IPO was in early November.
There have been signs of optimism, though, spurred by dealmaking and the prospect of interest rate cuts by the Federal Reserve. So far, the beneficiaries appear to be companies further along in drug development, rather than in earlier stages.
CG, for instance, has a drug already in Phase 3 testing. With its pricing, six of the last seven biotech IPOs involved companies with drugs in at least Phase 2. Three of the other four biotechs to recently file for an offering — Arrivent, Alto Neuroscience and Kyverna — fit that profile as well. By comparison, nearly two-thirds of companies that went public in 2020 and 2021 were in preclinical or Phase 1 testing, BioPharma Dive data show.
“IPOs were largely driven by new technology” a few years ago, said Kazi Helal, a senior analyst at PitchBook. "But now we're actually waiting for technology to mature."
The interest in CG stems from a drug called cretostimogene grenadenorepvec, which the company is developing for non-muscle invasive bladder cancer. The medicine, a type of immunotherapy known as an oncolytic virus, is being tested in a handful of studies, among them a late-stage monotherapy trial and a Phase 2 combination study with Merck & Co.’s Keytruda.
CG is developing cretostimogene grenadenorepvec for patients whose cancer progresses or relapses after standard immunotherapy and a surgical procedure. About half of patients who respond to that regimen later have their disease recur, after which there are limited treatment options, the company said in its IPO filing.
The drug has shown promise in that setting in an ongoing Phase 3 trial. Interim results last year revealed that 50 of the 66 evaluable study participants had no detectable cancer after receiving treatment. About three-quarters of those so-called complete responses lasted for at least six months. Side effects were mostly mild to moderate in nature. Updated results from the study are expected later this year.
CG’s road to an IPO is a sign of the times, as during the downturn, startups have had to stay private for longer. The company raised $308 million before its offering, including a $105 million Series F “crossover” round that bridged it to the public markets.
“Because the IPO market is so much more difficult, you really need to see this broad support before,” said Michael Rome, a managing director at CG investor Foresite Capital, in an interview last year.