Kallyope

Background

Kallyope is a fast-growing, clinical-stage unicorn biotech that is gearing up to go public. They’re based in NYC at the Alexandria Center and have ~100 employees of which 75% are in discovery and research. They have a fully integrated, proprietary discovery platform named Klarity with a pipeline of 20+ programs, of which two are in clinical trials.

Kallyope is looking for the optimal path to gain capital runway in order to bring its current lead metabolic circuits asset to market and is looking to take their company public. Their lead asset’s Phase 2a data outcomes will greatly influence the amount of capital raised in the public markets as well as the equity dilution that would occur as a result. Our team was tasked with providing guidance on the most opportune timing for Kallyope's IPO: Should Kallyope proceed with an IPO before or after the disclosure of Phase 2a clinical trial data?

Approach

To answer this question, we identified a variety of internal and external factors that will impact Kallyope’s IPO timing. They are shown in the diagram below:

Each of these verticals required a different type of analysis:

● Market Attractiveness: conducted interviews with senior bankers that work with biotech clients, analyzed news/expert expectations of market performance over the next 12 months

● Valuation Expectation: performed statistical analysis on valuation impact across different phases of biotech IPOs (Pre-Clinical to Marketed)

● Co-Co Deal (Co-Development, Co-Commercialization)l: conducted KOL interviews, assessed big biopharma partner investment behavior over the past 12 months, identified case studies for further insights

● Clinical Trial Success: engaged with internal Kallyope stakeholders and discussed capabilities and expectations on trial success

● Financial Readiness: engaged with internal Kallyope stakeholders and gained a deeper understanding of Kallyope’s current financial position

Recommendation

Our team identified that Kallyope should go public after the disclosure of Phase 2a clinical trial data.

Factors that were determined as significant to Kallyope’s IPO timing recommendation:

● Market Attractiveness

○ Metabolism drugs market is expected to grow from 6.3% to 8% CAGR.

○ 73% of Biotech leaders foresee sector growth; 36% of leaders expect increased profitability in the next 12-months.

○ Over 10 competitors developing similar drugs, including oral, will show proof of concept, test market, and reduce risk for investors.

● Clinical Trial Success

○ Kallyope’s drug holds unique characteristics (oral availability, fewer side effects, lower cost of goods) compared to current competitors.

○ Positive internal predictions for Phase 2a data lower risk for Kallyope.

Factors that were not as significant to our recommendation:

● Valuation Expectation

○ Analysis shows biotech valuation is equally optimal pre vs. post Phase 2 clinical trial.

● Co-Co Deal

○ Fewer investments from biopharma partners due to difficult economic environment, which leads biopharma to want more assurance in their risky bets.

○ Results in biopharma to prefer investing in later-stage biotech assets - not reliant upon Kallyope being public or not.

● Financial Readiness

○ Existing cash runway available; no urgent financing need.

Final Thoughts

Our team had an incredible time learning through this project and from collaborating with the Kallyope team. We enjoyed the opportunity to challenge ourselves and dive deep into subject matter that we weren’t intimately familiar with at the start of the semester. We hope our analysis will help Kallyope in making a more informed decision regarding their IPO timing. Thank you Professors Carri Chan, Peter Tollman, and Taylor Sewell for their consistent support and guidance throughout the semester.

Contributors: Christine Hochen, Shailen Sampath, Phillip Chung, Alejandro Sousa, Sujaan Sanghvi