Amid market turbulence, a Flagship startup pushes off an IPO with a new fundraise

Not too long ago, startup biotechnology companies could envision a quick path to public markets. But the road to an initial public offering is now longer, and the latest example comes from a new funding round announced Tuesday by Senda Biosciences.

Senda closed a $123 million Series C round from founding investor Flagship Pioneering and a large group of other investors. The biotech, which is researching the complex interplay between human cells, bacteria and other organisms, has to date raised $266 million since its launch less than two years ago.

Senda’s decision to raise additional funds privately reflects the recent downturn that ground the pace of biotech IPOs to a halt. Only 15 drug developers have gone public in 2022, versus 81 by this time a year ago, according to data compiled by BioPharma Dive. Early-stage investors have indicated in interviews over the past few months that they plan to keep some of their companies private for longer as a result of the difficult market.

Senda is among them. According to CEO and Flagship partner Guillaume Pfefer, the company made its decision to go with a third round of private financing, rather than an IPO, to heed market signals. The company has no plans to IPO or raise another private round anytime soon, Pfefer said.

“Going public elevates our visibility and creates a shorter runway for what is expected,” he said. “We have probably a bit more time when we are going through a private round.”

Senda will use that time to advance its first potential medicines towards human testing, with plans to start clinical trials by the end of 2022. Though the Cambridge, Mass.-based company hasn’t settled on a specific disease to target initially, it’s looking within infectious diseases, metabolic disorders and cancer.

Senda is focused on what it terms “intersystems biology,” or the interactions between human cells and the other living organisms inside the body. Senda analyzes the signals being sent between them — say, a chemical from a bacteria that aids human health — and, helped by machine learning tools, uses that information to develop potential drug candidates.

The company claims this approach could point the way to new types of treatments, such as oral stand-ins for drugs like insulin that are currently injected.

Though Senda’s work remains early, its potential has caught the eye of at least one major partner, Nestlé Health Science. The two formed a research collaboration in January 2021 to develop drug candidates for metabolic conditions including obesity and glycemia.

The ultimate goal of Senda’s platform, Pfefer said, is “getting more treatment for more people faster.”

Like many of Flagship’s other investments, Senda is based on a platform technology, which is meant to churn out many drugs, not just one. Investors interviewed by BioPharma Dive have suggested that interest in platforms has diminished during the sector’s downturn. Some companies are being built more cautiously as a result.

Stephen Berenson, a managing partner at Flagship, acknowledged the shift away from platform companies in an interview with BioPharma Dive last month, adding that his firm is thinking “quite carefully” about how it finances its private companies.

For Senda, that means biding its time and making more progress privately. The company launched with an $88 million commitment from Flagship, added another $98 million last June and has now put its third round together in three years. It plans to seek FDA permission by the end of the year to start several clinical trials, Pfefer said.

“Great science and great data always attract investors,” Pfefer said.

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