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Scottish Mortgage to benefit from Denali IPO

Scottish Mortgage to benefit from Denali IPO – Baillie Gifford-managed Scottish Mortgage Investment Trust SMT looks set to receive a significant £85m windfall as a result of last week’s Nasdaq IPO of  Denali Therapeutics, a US-based biotech in which it invested in 2016. Baillie Gifford was the lead investors in Denali’s $130m Series B financing round, investing c£20m on behalf of SMT at the equivalent of $4/share.  In the company’s IPO on Friday, shares were offered at $18 and rose by 19% on the first day of trading to over $21/share, boosting the market to market value of SMT’s shareholding to c£105m, investment trust specialists at QuotedData calculate.

The offering for the neuro-degeneration focused biotech was notable for the sum raised – $250m – and the resulting capitalisation of Denali at $1.7bn, both much larger sums that is typical in a US biotech IPO. It is also unusual for the fact that Denali does not yet have clinical data for any of its pipeline products, with its most advanced compound, Parkinson’s disease drug candidate DNL201 in Phase I studies. The prospectus suggests the IPO proceeds will finance more clinical research on that drug, as well as the start of clinical trials for a second Parkinson’s compound, DNL151.

Pharmaceuticals and biotech represented 11.6% of the SMT’s NAV at the last balance sheet date at the end of March. The trust’s largest biotech holding was Bluebird Bio, then valued then at £68.5m, when the Bluebird stock was quoted at c$90/share. Bluebird stock has more than doubled since then and by coincidence is up again strongly today, on the back of highly promising data presented at a scientific conference over the weekend. This related to two studies of Bluebird’s LentiGlobin gene therapy product candidate in transfusion-dependent β-thalassemia.  Bluebird Bio stock is up 20% premarket today at c$205/share.

SMT : Scottish Mortgage to benefit from Denali IPO

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