Whether a brain cancer drug enters the body through a needle in the arm or swallowed by mouth, the blood-brain barrier stands as a formidable last obstacle on the therapy's journey to its destination. NeOnc Technologies navigates around this protective barrier using drugs inhaled through the nose. With a lead program in mid-stage clinical testing, NeOnc is now preparing to take itself public.
Though some recent signs point to improving IPO conditions, the IPO window has been mostly closed to biotech companies the past two years, which NeOnc knows firsthand. After laying groundwork for a traditional IPO earlier this year, the Westlake Village, California-based firm withdrew its registration statement amid lukewarm investor interest. NeOnc is changing course. Just as its drug takes an alternate path to the brain, the company is pursuing an alternate way of going public: a direct listing. Executives say they expect to file new securities paperwork this month.
NeOnc is seeking investor buy-in for its novel approach to treating aggressive brain cancers, such as glioblastoma. The standard of care includes surgery, chemotherapy, and radiation. If the cancer advances, the standard drug treatment is temozolomide, brand name Temodar, a Merck chemotherapy in oral and injectable formulations that was initially approved in 1999. According to NeOnc CEO Thomas Chen, a neurosurgeon and professor of neurological surgery at the University of Southern California's Keck School of Medicine, the challenge for the Merck drug is getting enough of it through the blood-brain barrier to reach tumors.
There's precedent for intranasal drug delivery to hit central nervous system targets. Some migraine drugs work this way. NeOnc's drug, NEO100, leverages cranial nerves in the brain, Chen said. While these nerves play a role in our senses, including smell and taste, they can also transport drugs across the blood brain barrier.
"We want our drug to get to the target, but instead of trying to open up or break through the blood-brain barrier, we're trying to bypass it," Chen said.
The Idea for Intranasal Drug Delivery to the Brain
The active pharmaceutical ingredient in NEO100 is perillyl alcohol (POH), a naturally occurring compound isolated from essential oils of certain plants. While POH is an ingredient in common consumer items such as cosmetics and cleaning products, lab tests have also shown it interferes with the replication of dividing cancer cells, Chen said. However, academic research testing oral POH found not enough of the compound reached the bloodstream to confer a therapeutic effect. Increasing the dose led to intolerable gastrointestinal side effects.
Chen said the idea for delivering POH through the nose came from a NeOnc co-founder, a neurosurgeon who had success testing intranasal delivery of the compound in Brazil. NeOnc's intellectual property is technology licensed from USC that enables the company to make ultra-pure, pharmaceutical-grade POH. The drug is administered with a commercially available nebulizer.
In NeOnc's Phase 1 dose-escalation study testing NEO100 in 12 glioblastoma patients, published results showed the drug was safe and well tolerated. This trial was not powered to demonstrate efficacy, but Chen noted three patients lived more than three years and one is still alive. For context, glioblastoma patients whose disease has returned after one or more rounds of standard treatment live an average of six months. A genomic analysis of tumors found better responses in those with a specific genetic signature, a mutation to IDH1 enzymes. IDH1 has validation with the recent FDA approval of the first systemic brain cancer therapy for that target, a pill from Servier Pharmaceuticals. NeOnc's ongoing Phase 2a test is recruiting patients with IDH1 mutations.
When NeOnc set preliminary IPO terms this past winter, it aimed to raise about $75 million. NeOnc's largest shareholder is AFH, a biotech-focused family office. Amir Heshmatpour, managing director of AFH and executive chairman of NeOnc's board of directors, said institutional investors did not warm to NeOnc, telling him they prefer companies be in late-stage testing or at least have Phase 2 data.
"Institutional investors have pulled back in the last five years," Heshmatpour said. "They want you to de-risk the lead asset as fast as possible with as little money as possible."
A Rare Path to the Public Markets
NeOnc withdrew its registration statement in June, then raised $18.5 million, a combination of equity financing and the conversion of debt into equity. The company also stated its intention to go public via a direct listing. Whereas an IPO raises new capital by issuing new shares sold to the public, a direct listing involves no new shares and raises no new money, said Taylor Wirth, a partner at Barnes & Thornburg who specializes in securities transactions. Instead, company insiders sell their shares to the public without involving underwriters, explained Wirth, who has no connection to NeOnc. With no new shares offered, existing shareholders experience no dilution. Going public this way is also cheaper than an IPO because a company avoids paying underwriting fees.
Music-streaming company Spotify, which went public in 2018, might be the most prominent direct listing example. The direct listing trend peaked in 2021, when six U.S. companies went public this way, according to PitchBook. From 2018 to mid-2023, the most recent figures available from PitchBook, 14 U.S. companies went public via a direct listing -- none in the life sciences. There's been at least one biotech direct listing this year. FibroBiologics, a regenerative medicine company in early-stage clinical development, completed its direct listing in January.
Direct listings are particularly rare for biotech, Wirth said. One reason is that drug development is R&D intensive and companies in this sector need substantial sums of new money to finance that work. The benefits of a direct listing are clearer for well-capitalized companies that do not need extra cash, Wirth said.
"I think the original thinking around the direct listing is you could cut out the middle man, cut out the underwriter, and democratize the process of going public," he said. "But people found services of underwriters are extremely helpful marketing shares, placing them with investors. Going public is a complex legal and business process. Underwriters are helpful navigating those waters."
The biotech IPO market is showing new signs of life. BioAge Labs, a metabolic diseases-focused company collaborating with Eli Lilly, filed its registration statement last week. Two clinical-stage developers of bispecific antibody drugs, Zenas Biopharma and Bicara Therapeutics, have each set financial terms for IPOs expected to price this week.
If NeOnc is able to join those companies on the public markets, it aims to continue work on other programs that use NEO100 as a way to deliver other therapies into the brain. NEO212 is comprised of NEO100 conjugated to Merck's glioblastoma drug. The company also has preclinical research testing NEO100 as a way to deliver the Parkinson's disease drug levadopa to the brain. But NeOnc's near-term focus is glioblastoma. Chen expects the Phase 2a test of NEO100 will reach its targeted enrollment of 25 patients by the end of 2024; preliminary data could come in mid-2025.