The next biotech IPO might be a tough ask

Trevi Therapeutics wants to raise $70 million at a roughly $250 million valuation. That money will fund the company’s work to turn a reformulated opioid into a treatment for an itchy skin disease called prurigo nodularis, and a late-stage study is already under way.

What might be problematic to potential investors is that the drug already failed. In a Phase 2 study, neither tested dose of Trevi’s drug outperformed placebo when it came to reducing itch. The company did a post-hoc analysis of the data — which can lead to shoddy conclusions — and decided a modified trial design could make the drug’s next study into a success.

Trevi’s IPO, expected to price this week, will be an interesting barometer of market sentiment for biotech. The nine biotech companies that have gone public this year are trading up on average. But none had Trevi’s combination of potential stumbling blocks — the words “opioid” and “failed Phase 2,” for example — making this week’s pricing one to watch.