Stealth BioTherapeutics has popped up on the radar with a $78 million IPO to fund clinical trials for drugs treating rare mitochondrial disorders.
Shares of Stealth Bio (NASDAQ: MITO) made their stock market debut Friday at $12 apiece, which was the low end of the company’s targeted $12 to $14 range. The biotech sold 6.5 million shares, slightly more than the 6.2 million shares it had planned to offer. Stealth Bio sold American depository shares, which are securities offered by a foreign company for trading on a U.S. stock exchange. The company is based in the Cayman Islands but maintains most of its operations in Newton, MA.
In Stealth Bio’s first day of trading, shares closed at $11.01.
Stealth Bio discovers and develops treatments for diseases involving dysfunction of mitochondria, components of cells that produce energy for cellular functions. Stealth Bio’s lead therapeutic candidate, elamipretide, is a peptide. The company says in its IPO prospectus that the experimental drug targets and binds to cardiolipin, a part of the mitochondrial membrane. This approach is intended to stabilize the inner mitochondrial membrane.
Elamipretide is in Phase 3 testing as a treatment for primary mitochondrial myopathy, a disease that causes muscle weakness and fatigue. The disease, which Stealth Bio estimates affects 40,000 people in the U.S., has no FDA-approved treatment. The company is testing the drug in patients whose disease has a genetic basis; Phase 3 data are expected by the end of this year.
Stealth Bio has tested elamipretide in other mitochondrial diseases, with mixed results so far. The drug failed a Phase 2/3 study In Barth syndrome, a disease characterized by heart muscle weakness. Despite that outcome, Stealth Bio reported improvement in a subset of patients who the company believes are most likely to respond to treatment. Based on those results, Stealth Bio says it will meet with the FDA to discuss a potential application for regulatory approval.
Elamipretide has also been tested in Leber’s hereditary optic neuropathy, an inherited form of vision loss that has no FDA-approved treatment and only one approved treatment in Europe. Though the drug failed in Phase 2 testing, Stealth Bio reported some improvement, and the company is continuing to evaluate the drug in an open-label extension of the study. Stealth Bio says it plans to discuss the study with the FDA.
The drug is also in early-stage testing for another vision disorder, the “dry” form of age-related macular degeneration (AMD). Last June, Stealth Bio closed a $100 million round of venture funding, which the company said would be applied toward a Phase 2b study testing elamipretide in patients who have dry AMD. In its prospectus, Stealth Bio says that study is expected to start later this quarter.
A second Stealth Bio compound, SBT-272, was developed to treat rare neurodegenerative diseases, including amyotrophic lateral sclerosis (ALS). The company says it plans to start a Phase 1 study testing that drug by the end of 2019.
Last year, Stealth Bio reported spending $41.7 million on research and development through the third quarter. According to the prospectus, the company plans to use approximately $25 million of the IPO proceeds to complete Phase 3 testing of its lead drug in primary mitochondrial myopathy. The rest of the cash will be used for clinical development of that drug and SBT-272 in other diseases.
Stealth Bio’s drugs are based on technology licensed from Cornell University and the Institut de Recherches Cliniques de Montréal. The company was incorporated in 2006 under the name “Stealth Peptides.” In 2015, it changed its name to Stealth BioTherapeutics.
Stealth Bio’s largest shareholder is Morningside Venture Investments, whose more than 98 percent stake in the company dropped to approximately 65 percent after the IPO.
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