After the IPO, what next; A look at Tocagen Therapeutics

Tocagen Therapeutics (NASDAQ: TOCA) issued its first issuance in mid-April 2017 at $10.27 per share, opening its first IPO filing at the lower end of the $10 to $12 a share spectrum. The company previously hoped to sell 7.25 million shares but shipped off 8.5 million common shares instead. The main underwriters were Leerink Partners, Evercore ISI Group, and Stifel, Nicolaus & Co.

According to Tocagen’s CEO Martin Duvall, the company will put its incoming revenue stream into the advancement of its Phase 2/3 clinical trial to curb high-grade glioma (HGG). HGG is a type of brain cancer that tends to recur even after initial treatment with chemotherapy. Duvall took over Tocagen after leaving his Chief Commercialisation post with Ariad Pharmaceuticals, bringing to the pharmaceutical syndicate an extensive experience portfolio. He took over from Dr. Harry Gruber, co-founder of Tocagen Therapeutics and CEO from 2007 to 2016.

According to the filing made by the company earlier this year in March, the company’s opening valuation is strong when compared to the increasing number of HGG cases per year, which are said to be 14,000 this year in the United States alone. Tocagen’s successful IPO can also be attributed to the success of its Phase 1 clinical trials which registers 126 subjects and a likely success rate. Add to that is the fact that cancer-based treatment firms have always had relatively successful IPOs in the NYSE and NASDAQ.

Tocagen’s stocks were risky to purchase to begin with, because though successful, the company does not have a product on sale to create a revenue stream. The company reports using over $8 million to set up treatment trials and raising over $131.4 million since its inception to get through Phase 1 of the clinical trials. The funds were obtained from the sale of convertible preferred stock, payable notes, and convertible promissory notes. Institutions such as the National Brain Tumor Society and the American Brain Tumor Association also issued grants to Tocagen.

With the $85 million the firm raised, it can now venture into Phase 2 of its principal products’ trials, involving their validation and manufacture. This phase will have 187 subjects and will test the efficiency of gene therapy in the curbing of HGG. In the trial, Tocagen’s Toca 511 compound will be introduced to body cells, releasing a protein that will produce anti-cancer agents when compounded with the Toca 5-FC. The company stands to gain substantial revenue from the success of these two products to which it holds intellectual rights. At present, Tocagen Pharmaceuticals has 58 issued and 75 pending patents all involving the development of the two primary products.

Phase 1b of the trials which will tackle glioma as well as other cancers such as the breast and pancreatic variety will also be funded from monies from the IPO.

The company’s reported $31.2 million in cash flow by the end of last year. The primary concern of the company remains what next after the IPO. Celldex Therapeutic Company (CLDX) also had successful trials until its third phase produced a non-reliable drug. Tocagen might fine-tune its trials in the second stage to prevent this. The company has also shadowed the move made by Celldex by making partners. Celldex’s partnership with Bristol-Myers Squibb (BMY) ensured its survival after the drug trial failure.