Menlo Therapeutics, a biotech company looking to establish itself in the market with a series of promising drug trials, raised investor’s eyebrows after its IPO brought in some $119 million for the company. Analyst on Wall Street see serious potential in the company’s future, and its growing share prices seem to reflect broad confidence amongst its early financial backers.
Buoyed by drug trials
The success Menlo Therapeutics Inc (NASDAQ:MNLO) is currently enjoying is probably thanks to the forthcoming skin treatment trials its developing, which are expected to materialize for the first time later this year. Investors seem to believe that Menlo’s drugs, once they finish their long and arduous testing process and get approved, will be a goldmine, and want to get behind the company before its share prices skyrocket.
While Menlo’s original IPO plans revolved around offering almost 6 million shares to investors at a price range of $14 to $16, the company’s executives saw an opportunity before it went public, and raised their expectations. Ultimately, Menlo’s IPO offered some 7 million shares sold at an impressive $17 each, but quickly saw share prices skyrocket even further. At the close of trading on Friday, Menlo’s shares were hovering at some $28 each, and many onlookers haven’t ruled out the potential for it to climb even further in forthcoming days.
Filings made by Menlo with the SEC go a long way towards explaining how seriously successful its IPO was. Menlo was initially expecting a relatively paltry $85 million from its IPO, meaning its true $119 million result will likely go far beyond executives’ expectations and help the company fund more trials in the immediate future. While the process of drug testing is incredibly long and expensive, having lead Menlo to incur serious losses for a few years straight, such losses are the norm in the industry, and its mammoth IPO will go a long way towards ensuring its long-term financial stability.
Drugs that Menlo is developing to combat Irritating skin diseases could be a cash cow for the company for years to come, particularly if it legally secures exclusive rights to the drugs it masterminds, and investors familiar with the biotech scene should understand that losses should be expected at this stage in a company’s history. With Menlo’s share prices having rapidly buoyed during trading days immediately after its IPO, it stands to reason that investors are confident the company will get its drugs finished and out on the market in time to turn a profit.
More room to grow
While Menlo has enjoyed not only a particularly explosive IPO but also subsequent share price growth, the company still has more room to expand, and the current bonanza propelling it upwards doesn’t necessarily have to end anytime soon. As the company’s website shows, the diseases and conditions its fighting, like Serlopitant, will be beaten back by their drugs much sooner than many anticipate.
Phase III trials for one drug combating prurigo nodularis itch, for instance, are expected to begin later in 2018, meaning the company will have tangible results to show investors very soon. While biotech investors usually understand the necessity of waiting long periods of time for drugs to properly develop, newcomers to Menlo who backed the company after seeing its initial rapid rise as a New Mexico LLC may not be so patient, and the trials later this year will go a long way towards ensuring they remain placated.
With the global therapeutics market for pruritus expected to reach a staggering $16 billion by 2025, there are few reasons to expect anything short of absolute success from Menlo. The company clearly has a savvy leadership team coupled with an innovative set of scientists ready and willing to churn out helpful and lucrative profits, and the industry appears to be thriving. Keep your eye on Menlo Therapeutics; the company’s IPO may have been dismissed by some as a mere unexpected fluke in the market, but Menlo’s stock has shown serious potential. If the trials that occur later this year prove to be a major success, the company could skyrocket even higher, and Menlo’s future in its industry is looking as bright as it ever has.