Menlo Therapeutics, a skin condition treatment developer backed by pharmaceutical companies Novo and Merck & Co, closed its initial public offering yesterday having secured approximately $137m.
The company initially issued 7 million shares, up from 6.5 million, on the Nasdaq Global Select Market priced at the top of its $16 to $17 range to raise $119m. Menlo’s shares opened at $20.50 on the first day of trading last week and closed at $33.39 yesterday.
Joint book running managers Jefferies, Piper Jaffray and Guggenheim Securities, and lead manager JMP Securities have taken up the option to buy a further 1.05 million shares to add $17.9m to the offering. Menlo currently has a market cap of approximately $921m.
Founded in 2011, Menlo is developing a drug called serlopitant that would be the first to get regulatory approval in the US as a treatment for pruritus, an itch caused by with skin conditions such as psoriasis, atopic dermatitis and prurigo nodularis.
Serlopitant is also being advanced as a treatment for refractory chronic cough, and Menlo will put $16m of the IPO proceeds into phase 2 trials of the drug for refractory chronic cough as well as atopic dermatitis and psoriasis.
A further $23m will support a phase 3 trial for serlopitant in pruritus associated with prurigo nodularis, while $13m will fund external development and manufacturing expenses. Merck will receive $3m as a milestone payment once the drug reaches the phase 3 trial stage.
The IPO followed approximately $110m in funding, life sciences-focused venture capital firm Remeditex and Velocity Pharmaceutical Development, a vehicle established by VC firm Presidio Partners, having provided some $14.3m for the company between 2011 and 2015.
Vivo Capital, Presidio Partners, Remeditex Ventures and F-Prime invested another $45m in Menlo in a 2015 series B round.
Novo took part in Menlo’s $50.5m series C round in July 2017 together with VenBio, which led the round, F-Prime Capital, which is part of financial services group Fidelity, Presidio Partners, Remeditex, Rock Springs Capital, Aisling Capital, Bay City Capital and Vivo Capital.
Novo’s share of the company was lower than 5% but Merck, which licensed serlopitant to Menlo in 2012, has its stake in the company cut from 8.3% to 5.7% in the offering.
Vivo Capital owned 24.9% of Menlo and bought $5m of shares in the offering, giving it an 18.3% stake post-IPO. Remeditex invested $1.7m in the offering and came out with a 12.6% stake while VenBio acquired $4.5m of shares to give it a 6.7% stake.
Presidio Partners’ 16.5% stake was diluted to 11.2% in the offering while F-Prime’s was cut from 7.5% to 5.1%.