With IPO Off The Table, Argos Takes $25 Million From VCs
The cancer immunotherapy developer withdrew its IPO registration last month, turning instead to insider investors as it prepares for a pivotal Phase III trial on a dendritic cell treatment.
Seven weeks after scuttling its proposed initial public offering, Argos Therapeutics Inc. has raised a $25 million round of private capital to support ongoing development of its dendritic cell treatment for metastatic renal cell carcinoma.
Cash-strapped for months, Argos sought funds to begin a pivotal Phase III trial on AGS-003, a personalized treatment in which cells from a patient’s tumor are modified and re-infused into the body, where they trigger an immune response specific to the tumor. The method of treatment is similar to that of Dendreon Corp.’s Provenge (sipuleucel-T), approved in April 2010 for a subset of prostate cancer patients ("Provenge Nod Lifts Spirits And Stocks, But Also Sets High Bar For Success" — "The Pink Sheet," May 17, 2010). Argos now plans to begin the Phase III trial in mid-2012; the drug has received fast-track designation from FDA as well.
Argos’ existing investors supplied all of the new money. Forbion Capital led the round, while insiders including TVM Capital, Lumira Capital, Intersouth Partners, Caisse de dépôt et placement du Québec, Morningside Group, and Aurora Funds contributed the balance. Five firms – TVM, Lumira, Intersouth, Forbion and CDP – held roughly 70% of Argos’ shares prior to the new round, according to a February regulatory filing. At that time, TVM held the largest stake at 19.1%, while Forbion was its fourth-largest shareholder at 12% before leading the new round.
VCs had collectively poured $89 million into the company since its inception in 1997. The new round brings its total funding to $114 million, plus $120 million in partner revenue over the years. It last raised equity capital when TVM led its $35.2 million Series C round in 2008, although it negotiated a $10 million bridge financing in the interim as well.
Argos had hoped to raise $65.8 million in net proceeds from its IPO, according to the regulatory filing. It was aiming to sell 5.25 million shares for $13 to $15 apiece, but withdrew the offering on March 6. The company’s total budget, including the bill for AGS-003’s Phase III trial as well as other development and overhead costs, will add up to roughly $75 million through mid-2015. It will seek additional private funding or partnership revenue to account for the balance, according to Argos chief executive officer Jeff Abbey.
Regulatory filings showed that Argos had just $2 million in cash, cash equivalents and short-term investments as of December 31, 2011. Its partner revenue had dried up, as Kyowa Hakko Kirin Co. Ltd. and Novo Nordisk AS had terminated development deals around other drugs, leaving Argos with little in the bank and a working capital deficit of $19.5 million.
Dendreon Comparisons: Validation, But Also Trepidation
With Dendreon trading near $40 per share last summer, Argos had hope that the public would see it as a similar opportunity – for better or for worse, as it turned out. Market conditions for IPOs have been less than favorable for years, but Argos seems to have had exceptionally bad timing. The company registered for the offering on July 29, 2011, just a few days before Dendreon shares lost about two thirds of their value. Dendreon said at the time that it had missed its sales target, magnifying worries about Provenge uptake, reimbursement and demand ("Disappointing Provenge Sales Stir Doubts About Demand" — "The Pink Sheet" DAILY, Aug. 4, 2011).
Dendreon shares have hovered between roughly $6.50 and $14 since August. An uptick during the winter was cause for some optimism at Argos, Abbey said, but another quarter of underwhelming Dendreon revenue further weakened market conditions for an Argos IPO, and the offering was canceled in early March. “We were not willing to take just any offer,” Abbey said, adding that some potential Argos investors found the three-and-a-half year wait for final data daunting.
As a result, Abbey said that Argos has had to fight comparisons with Dendreon, while also acknowledging that the company’s pioneering approach to cancer immunology and Provenge’s approval provides some validation of Argos’ endeavors. “Public investors would like to put companies in boxes,” he said. “It makes it hard to differentiate ourselves, although our technology is totally different.”
Abbey pointed out both scientific and business differentiators between the two, most notably that Dendreon uses an off-the-shelf antigen specific to prostate cancer in its therapy, while Argos aims for mutated antigens that are distinct to each patient. He also said Argos also will have a lower cost-of-goods, thanks to its automated manufacturing platform, leading to less pricing competition. Moreover, he said, the kidney cancer marketplace is generally far less crowded and competitive than prostate cancer.
Argos hopes that AGS-003 will be combined with existing cancer therapies such as Pfizer Inc.’s Sutent (sunitinib), the current standard-of-care in metastatic renal cell carcinoma and the drug with which it will be compared in the Phase III trial. Three hundred patients will receive the experimental combination, while another 150 will receive sunitinib alone, Abbey said.
Prior data from a Phase II trial on AGS-003 showed a median overall survival rate of roughly double that of sunitinib alone, from about 15 months to 30. Abbey said that since AGS-003 shows “virtually no toxicity,” it will be an attractive combination therapy alongside existing approved compounds.
Although Argos has other programs under development, AGS-003 is its most advanced and most expensive. A Phase IIb trial on HIV drug AGS-004 is fully funded by the National Institutes of Health. And while its Phase I lupus drug AGS-009 and its preclinical autoimmune program AGS-010 hold some promise, the company plans to spend very little of the new funds on pipeline drugs. Rather, it will seek partners for any or all of the three.
Argos could even seek a regional or worldwide partner for AGS-003, Abbey said, although it is unlikely to make a move until it begins receiving its first Phase III data sometime next year. Early immune response data has been an indicator with overall survival rates in previous trials. And while the kidney cancer indication is currently Argos’ biggest priority for AGS-003, Abbey said a company could be built around other cancer indications instead, if the drug is partnered.