By Sarah Toy
Hookipa Pharma Inc., a biotech that’s using arenavirus-based platforms to develop treatments targeting infectious diseases and cancers, priced its initial public offering on the low end of its range late Wednesday.
The company said it will sell 6 million shares at $14 each, after previously saying it would offer 6.7 million shares priced at $14 to $16 each. Hookipa /zigman2/quotes/211319636/composite HOOK +0.65% raised $84 million, and is expected to debut on the Nasdaq exchange Thursday under the ticker symbol “HOOK.”
Only one of Hookipa’s six pipeline drugs is in the clinical stage of development. It’s a therapy called HB-101, meant to treat cytomegalovirus (CMV), a common virus that is generally clinically benign in healthy people but can cause serious issues in people who are immunocompromised. HB-101 uses Hookipa’s VaxWave technology, an arenavirus that can induce a strong immune response against infectious disease but does not replicate. The other five pipeline drugs, all in preclinical stages of development, target hepatitis B, human immunodeficiency virus (HIV), cancers caused by human papilloma virus (HPV) and prostate cancer. The oncologic therapies use the company’s TheraT technology, which is based on the arenavirus but is supposed to produce an even more powerful immune response.
Like many biotech prospectuses, Hookipa’s S-1 is filled with language about the speculative nature of biotech and the fact that the company has operated at a loss since its inception. “We are not profitable and have incurred losses in each period since our inception in 2011,” Hookipa wrote, noting it reported net losses of $12.7 million and $16.7 million in the years ended 2017 and 2018, respectively. The company added that it expects to continue to incur significant losses for the foreseeable future, another statement commonly found in biotech prospectuses.
Bank of America Merrill Lynch, SVB Leerink and RBC Capital Markets are joint bookrunners on the deal with Kempen acting as co-manager.
Here are five things to know about the company as it readies its IPO.
Hookipa doesn’t have sufficient personnel to properly check the company's accounting
Hookipa disclosed in its prospectus that it does not have enough people to do proper checks and balances on its numbers.
“Prior to this offering, we have been a private company with limited accounting personnel and other resources with which to address our internal control over financial reporting,” the company wrote in its prospectus, adding that it “did not maintain a sufficient complement of resources with an appropriate level of accounting knowledge, experience, and training, which would allow for appropriate monitoring, presentation and disclosure, and internal control over financial reporting.”
“Specifically, we have not designed and implemented a sufficient level of formal accounting policies and procedures. Additionally, the limited personnel resulted in our inability to consistently establish appropriate authorities and responsibilities in pursuit of our financial reporting objectives, as demonstrated by, amongst other things, our insufficient segregation of duties in their finance and accounting functions,” Hookipa wrote.
A situation like this opens up the opportunity for accounting mistakes and, in the worst case, fraud.
There are some holes in Hookipa’s insurance coverage
Hookipa does not carry biological or hazardous waste insurance, and its property, casualty and general liability insurance policies specifically exclude coverage for damages arising from biological or hazardous waste exposure or contamination, according to the company’s prospectus.