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Small Biotech Company Seeks to Raise up to $100 Million With Digital Tokens

Small Biotech Company Seeks to Raise up to $100 Million With Digital Tokens

(Bloomberg) -- In a novel approach for the biotechnology industry, small-cap company Agenus Inc. is aiming to raise $50 million to $100 million by issuing digital securities backed by future sales of an experimental cancer drug.

The digital securities will allow investors to bet on future sales of single products and will have a limited impact on shareholders’ equity, the company said. Agenus plans to offer at least 25 million of what it calls biotech electronic security tokens, or BESTs, to certain high-net-worth individuals and institutional investors starting Feb. 15.

Small Biotech Company Seeks to Raise up to $100 Million With Digital Tokens

“With these types of novel instruments, you have a much more concentrated exposure to a specific product,” Chief Executive Officer Garo Armen said in a phone interview. It’s “inevitable” that other biotech companies will follow suit, he said.

Shares rose 4.4 percent to $3.54 at 9:49 a.m. in New York.

Lexington, Massachusetts-based Agenus is focused on immuno-oncology treatments and its cancer drug candidate is in mid-stage trials, that if successful, could lead to approval in cervical cancer by 2021, according to Armen. The drug belongs to a class of cancer treatments called checkpoint inhibitors, which also includes blockbusters such as Bristol-Myers Squibb’s Opdivo and Merck & Co.’s Keytruda.

The digital offering comes with risks. First, the drug needs to be approved by regulators to generate revenue. Most importantly, Agenus says the securities are “SEC-compliant” but they have not been approved by regulators yet. Armen expects full registration to happen in “a matter of months.”

Nonetheless, Wall Street analysts were intrigued by the deal. William Blair Matt Phipps wrote in a note to clients that the offering will help expand and accelerate the cancer drug’s development "in a capital efficient way." He rates the stock an equivalent of buy.

Chief Operating Officer Jennifer Buell says the company’s analysis shows that the offering will be “minimally dilutive” to equity holders, given the fact that the revenue backing these tokens will be capped at predefined amounts.

Armen said BESTs have “nothing to do with cryptocurrencies,” which have collapsed from their peak in late 2017. Besides making a few purchases of Bitcoin in its early days, Armen says he has not participated in the crypto market. The company is even considering “potential means” of protecting investors’ downside risk if “this product never sees the light of day,” he said. The tokens are blockchain-based, using the technology for verifying and recording transactions.

Agenus is raising the funds through Atomic Capital, a digital investment group that was founded in July. Atomic CEO Alexander Blum says his firm has seen “an overwhelming and accelerating interest” from biotech groups pursuing a similar funding strategy.

Agenus had $46.2 million in cash and equivalents as of Sept. 30, and just announced a $150 million partnership with Gilead Sciences Inc. last week. A month ago, Agenus pulled a registration filing, saying no shares have been sold. The stock fell 27 percent last year and both analysts covering the stock recommend buying shares.

--With assistance from Lily Katz.

To contact the reporter on this story: Tatiana Darie in New York at tdarie1@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Richard Richtmyer

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