Seeking Alpha
, IPOpremium (849 clicks)
Value, IPOs, long only
Profile| Send Message|
( followers)  

Based in South San Francisco, CA, KaloBios Pharmaceuticals (NASDAQ:KBIO) scheduled a $51 million IPO with a market capitalization of $238 million at a price range mid-point of $13, for the week of January 28, 2013.

Five IPOs are scheduled for the week of Jan. 28, 2013. The full IPO calendar is available here.

S-1 filed January 15, 2013.

SUMMARY
KBIO is a biopharma company focused on monoclonal antibody therapeutics. KBIO has a major partnership with the vaccines division of the Sanofi Group (NYSE:SNY), which has a market cap of $126 billion.

All of KBIO's revenue is contract revenue from the SNY partnership.

KBIO is in stage 1 and 2 clinical trials and is 70% pre-IPO funded by VC firms.

CONCLUSION
The partnership with SNY is a major endorsement. However, it's a long way from stage 1 and 2 clinical trials to breakeven. While KBIO is worth watching, it seems a bit risky on the IPO.

BUSINESS
KBIO is a biopharmaceutical company focused on monoclonal antibody therapeutics. KBIO has a portfolio of patient-targeted, first-in-class antibodies using KBIO's Humaneered® antibody technology to treat serious medical conditions with a primary clinical focus on respiratory diseases and cancer.

Principal pharmaceutical product candidates at the clinical development stage are:

• KB001-A, a Humaneered®, PEGylated, anti-PcrV Fab' antibody that is being developed for the prevention and treatment of Pa infections in mechanically ventilated patients and CF patients with chronic Pa infections, caused by Pseudomonas aeruginosa (Pa).

• KB003, a Humaneered® anti-GM-CSF monoclonal antibody that is being developed for the treatment of severe asthma inadequately controlled by corticosteroids.

• KB004, a Humaneered® monoclonal antibody directed against EphA3 which has the potential to offer a novel approach to treating both hematologic malignancies and solid cancer tumors.

SANOFI AGREEMENT
Sanofi Pasteur (Sanofi), the vaccines division of the Sanofi Group.

In January 2010, KBIO entered into an agreement with the vaccines division of Sanofi - $126 billion market cap - and granted Sanofi an exclusive worldwide license to develop, manufacture and commercialize antibodies directed against the PcrV protein of Pa (including KB001-A) for all indications. Sanofi is solely responsible for research, development, manufacturing, and commercialization.

As part of this agreement, KBIO retains the right to develop and promote KB001-A for Pa in CF or bronchiectasis patients. Sanofi is focusing its clinical development on prevention of Pa VAP.

KBIO received an initial upfront payment of $35 million and an additional $5 million payment in August 2011 that were recognized as revenue through June 30, 2012.

KBIO has the potential to receive additional contingent payments aggregating up to $250 million upon achievement by Sanofi of certain clinical, regulatory and commercial events, together with tiered royalties based upon global net sales of licensed products.

CLINICAL TRIALS
KBIO initiated a 180 patient randomized, double-blind, placebo-controlled Phase 2 clinical trial for KB001-A in Cystic Fibrosis patients with chronic Pa infections in January 2013.

In August 2012, KBIO initiated a 150 patient, randomized, double-blind, placebo-controlled, monthly-dose, intravenous Phase 2 clinical trial for KB003 in patients with severe asthma inadequately controlled by corticosteroids.

KB004 is in Phase 1 clinical testing for hematological malignancies.

INTELLECTUAL PROPERTY
KBIO solely owns eight issued U.S. patents, owns one issued U.S. patent jointly with a third party, and has an exclusive license to six U.S. patents and owns 16 issued foreign patents.

KBIO has 114 patent applications pending globally, including 19 non-provisional patent applications in the United States, which includes 16 that are solely-owned by KBIO and three that KBIO owns jointly with others. The patents to the Humaneered® technology covers methods of producing very specific human antibodies using only a small region from mouse antibodies.

For licensing agreements see S-1 page 89.

COMPETITION
There are several companies treating Pa using antibiotics or alternative approaches. For example, Intercell AG has a fusion protein vaccine program in Phase 2/3 for the prevention of Pa in mechanically ventilated intensive care unit patients and Kenta Biotech Ltd. is conducting a Phase 2 trial for KBPA101, a monoclonal antibody against a specific Pa serotype.

There are two inhaled antibiotics (Tobi® and Cayston®) that have been approved for Pa to treat CF. KBIO is also aware of one biologic drug (Pulmozyme®) that is approved in the United States to treat respiratory problems in CF patients. KALYDECO®, a small-molecule drug that potentiates the form of the defective protein that causes CF, was recently approved by the FDA. VX-809 is a compound being developed by Vertex Pharmaceuticals, Inc. in Phase 2 clinical trials for CF.

Several companies are also working on anti-GM-CSF antibodies: Morphosys recently announced results of a Phase 1/2 trial in RA and is conducting a Phase 1 trial in multiple sclerosis; Micromet (now part of Amgen) has partnered with Nycomed (now part of Takeda) in a Phase 1 trial in RA, and MedImmune is conducting a Phase 2 trial in RA with an antibody against the GM-CSF receptor.

Although KBIO is no longer pursuing the RA indication, these competitors could nonetheless affect the market for an anti-GM-CSF antibody for severe asthma.

Many companies are developing drugs for asthma. Monoclonal antibody drug development has primarily focused on allergic asthma. Xolair®, which is co-developed by Genentech and Novartis, is currently the only monoclonal antibody that KBIO is aware of that is approved for the treatment of severe asthma.

Genentech (Roche), MedImmune, Novartis and Pfizer each have an anti-IL-13 antibody program in Phase 2 or Phase 3 testing for asthma. Other monoclonal antibodies in development target cytokines such as IL-4, IL-5, and IL-9 or their receptors. Although these drugs function differently, if successfully developed these drugs will compete in the asthma market.

Competition in cancer drug development is intense, with more than 250 compounds in clinical trials by large pharmaceutical and biotechnology companies. Many of these companies are focused on targeted therapies

PRE-IPO 5% STOCKHOLDERS
MPM BioVentures, 18%
Sofinnova Ventures 12%
Alloy Ventures, 11%
Fidelity Investments, 10%
Lehman Brothers Holdings, 7%
Baxter International Inc., 6%
GBS Venture Partners, 5%

USE OF PROCEEDS
KBIO expects to net $43 million from its IPO.

Proceeds are allocated to develop and advance product candidates through clinical trials, as well as for working capital and general corporate purposes.

NOTE: usually IPO candidates are more specific regarding use of proceeds, especially biopharma companies.

Disclaimer: This IPO report is based on a reading and analysis of KBIO's S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.

Source: IPO Preview: KaloBios Pharmaceuticals