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Based in Watertown, MA, Enanta Pharma (NASDAQ:ENTA) scheduled a $60 million IPO with a market capitalization of $252 million at a price range mid-point of $15 for Thursday, March 21, 2013.

Eight IPOs are scheduled for the week of March 18th. The full IPO calendar is available here.

S-1 filed March 5, 2013

Manager, Joint Managers: J.P. Morgan; Credit Suisse
Co Managers: Leerink Swann; JMP Securities

SUMMARY
ENTA creates small molecule drugs in the infectious disease field with independent research and collaborating with AbbVie (NYSE:ABBV) $55 billion market cap and Novartis (NYSE:NVS), $168 billion market cap.

ENTA has been receiving grants and collaboration payments resulting in a positive cash flow. Post IPO ENTA's available cash will be 42% of its market cap, or $107 million.

VALUATION

Valuation Ratios

IPO Mrkt

Price /

Price /

Price /

Price /

% offered

Annualizing Dec '12 qtr

Cap (NYSE:MM)

Sales

Earnings

BookValue

TangibleBV

in IPO

Enanta Pharma

$252

2.3

2.9

2.1

2.1

24%

Glossary

CONCLUSION

  • So far ENTA has demonstrated an ability to collaborate with major partners, who have provided significant funding.
  • For a biopharma, ENTA post IPO will be cash rich.
  • ENTA should be bought on the IPO.

BUSINESS
ENTA creates small molecule drugs in the infectious disease field.

ENTA is discovering and developing inhibitors designed for use against the hepatitis C virus, referred to as HCV.

ENTA believes that a successful approach to a complete cure for HCV in most patients will likely require treatment with a combination of drugs that attack different mechanisms necessary for replication and survival of HCV.

Further, because there are many variants of HCV, ENTA is developing inhibitors that may be used in multiple combination therapies, each designed and tested for effectiveness against one or more of those variants.

ENTA's development of inhibitors for validated HCV target mechanisms, as well as collaborations with AbbVie (which refers to Abbott Laboratories (ABT, $55 billion market cap) for all periods before January 1, 2013) and Novartis (NVS, $168 billion market cap), should allow ENTA to participate in multiple unique drug combinations as ENTA seeks the best combination therapies for HCV in its various forms.

MARKET
Total worldwide sales of HCV therapies were over $3.5 billion in 2011. ENTA believes that annual worldwide sales of these therapies and future approved therapies could increase sales in this market to $10 to $20 billion within the next ten years.

In addition to HCV programs, ENTA has used its internal research capabilities to discover a new class of antibiotics which ENTA is developing for the treatment of multi-drug resistant bacteria, including methicillin-resistant Staphylococcus aureus bacteria, also referred to as MRSA.

ENTA has utilized its internal chemistry and drug discovery capabilities and collaborations to generate all of of its development-stage programs, and has active research efforts to broaden its infectious disease drug pipeline.

PORTFOLIO
ENTA's HCV portfolio includes inhibitors of four fundamental, validated HCV targets:

NS3 Protease Inhibitor: ABT-450. The lead product candidate, ABT-450, is a protease inhibitor being developed in several combination regimens in multiple Phase 2 and Phase 3 trials through collaboration with AbbVie.

NS5A Inhibitor: EDP-239. The lead NS5A product candidate, EDP-239, is being developed through collaboration with Novartis.

Cyclophilin Inhibitors. Independent research activities are focused on lead cyclophilin inhibitor candidates, which are in preclinical development.

Nucleotide Polymerase Inhibitor. ENTA also has a small-molecule drug discovery effort underway for nucleotide polymerase inhibitors.

FUNDING
Abb Vie (Abott Labs)
HCV programs, AbbVie has funded all research and development of ENTA's protease inhibitors since ENTA entered into the collaboration in November 2006, and is responsible for obtaining regulatory approvals and commercializing ABT-450 and any follow-on products worldwide.

ENTA received $57.2 million from AbbVie upon signing the collaboration agreement and its simultaneous purchase of preferred stock in 2006. ENTA also received a $40.0 million milestone payment in December 2010 following AbbVie's successful completion of a Phase 2a clinical trial and a $15.0 million milestone payment in December 2012 following AbbVie's initiation of dosing in a Phase 3 clinical trial that includes ABT-450.

Assuming AbbVie's successful development of the first protease inhibitor product, ENTA will also be eligible to receive $195 million of additional pre-commercialization milestone payments, as well as $80 million of additional milestone payments for each follow-on protease inhibitor product, if any, developed by AbbVie and tiered royalties per product ranging from the low double digits up to twenty percent, or up to the high teens on a blended basis, on AbbVie's net sales, if any, allocable to our collaboration's protease inhibitors.

Norvartis
Under collaboration with Novartis, Novartis is responsible for all further development of ENTA's NS5A inhibitors. Novartis is also responsible for funding further research that ENTA conducts to discover additional NS5A compounds at least through February 2013 and ENTA expects that this period will be extended through August 2013.

ENTA received an upfront payment of $34.4 million in March 2012 and an $11.0 million milestone payment in January 2013 based on Novartis' initiation of dosing in a Phase 1 clinical trial that includes EDP-239.

ENTA is eligible to receive up to $395 million of additional milestone payments for the first NS5A inhibitor product for which the specified milestones are achieved.

Enanta Pharma
ENTA is currently funding all research and development for the cyclophilin inhibitor and nucleotide polymerase inhibitor programs. ENTA expects to incur substantially greater expenses as it seek to advance these programs into clinical development.

NIH Affiliate
In addition to HCV programs, ENTA has used its internal research capabilities to discover a new class of antibiotics called Bicyclolides, which ENTA is developing to overcome bacteria with multi-drug resistance, known as "superbugs."

Up to $14.3 million of the preclinical development of the lead antibiotic candidate, EDP-788, is funded under a September 2011 contract with the National Institute of Allergy and Infectious Diseases, a division of the National Institutes of Health, an agency of the United States Department of Health and Human Services, or NIAID, and there is potential for further NIAID funding of early clinical development.

POTENTIAL FUTURE PAYMENTS
Since beginning operations in 1995, ENTA has devoted substantially all of its resources to the discovery and development of novel inhibitors for the treatment of infectious diseases.

Operations have been funded primarily through the sale of convertible preferred stock and payments received under collaborations and a government contract.

As of December 31, 2012, had $52.9 million in cash and investments. ENTA is eligible to receive over the next several years an aggregate of $430 million (exclusive of an $11.0 million milestone payment ENTA received in January 2013 from Novartis) based on potential future pre-commercialization milestones under our AbbVie and Novartis collaborations, assuming successful clinical trial results for the respective collaboration programs and our collaborators' continued development of our product candidates through successful regulatory and reimbursement approvals in the United States and other major markets.

In addition, ENTA is also eligible to receive tiered royalties ranging on a blended basis from the low double digits up to the high teens on worldwide net sales of any products containing protease inhibitors or NS5A inhibitors developed pursuant to the collaborations, as well as up to $160 million of commercialization sales milestones under the Novartis collaboration.

R&D
In our fiscal year ending September 30, 2013, ENTA expects to incur $16 million of costs associated with research and development, which amount is exclusive of costs incurred by collaborators in developing ENTA's licensed product candidates ABT-450 and EDP-239.

RISKS
To date, AbbVie has been and will continue to be responsible for all of the clinical development of ENTA's ABT-450 and other protease inhibitor product candidates, and Novartis is responsible for all future clinical development of ENTA's EDP-239 and other NS5A product candidates.

Financial prospects being substantially dependent upon the development and marketing efforts of AbbVie and Novartis for any drug product candidates incorporating ABT-450 and EDP-239, respectively; substantial competition in the market for HCV and for anti-infectives generally

INTELLECTUAL PROPERTY PORTFOLIO
As of December 31, 2012, ENTA had a total of approximately 64 issued U.S. patents and over 50 pending U.S. patent applications. ENTA has also applied for, and in some cases obtained, patents in various foreign jurisdictions. In addition to fortifying existing intellectual property position, ENTA intends to file new patent applications and take other steps to strengthen, leverage, and expand its intellectual property position.

COMPETITION
ENTA expects its licensed product candidates and future product candidates to face intense and increasing competition as new products enter the HCV and antibacterial markets and advanced technologies become available, particularly in the case of HCV therapies in combinations with existing products and other new products.

Two drug products, Incivek™ (telaprevir) of Vertex and Victrelis™ (boceprevir) of Merck, were approved in 2011 by the FDA for the treatment of HCV in combination with the previous standard of care consisting of interferon in combination with ribavirin. The evolving standard of care treatment regimens and the cure rates of patients using either one of these approved drugs and future approved combinations of DAAs other than ones ENTA has developed and are developing may be such that ENTA's development and discovery efforts in the area of HCV may be rendered noncompetitive.

ENTA believes that a significant number of product candidates that are currently under development may become commercially available in the future for the treatment of HCV. ENTA is aware that many competitors other than ENTA's collaborators have product candidates in Phase 2 or later stage clinical trials, including Achillion, Boehringer Ingelheim, Bristol-Myers Squibb, Gilead, Hoffman-La Roche, Idenix, Johnson & Johnson, Medivir, Merck and Vertex.

Competitors' products may be more effective, have fewer side effects, have lower costs or be better marketed and sold than any product candidate that includes ABT-450, EDP-239 or any future compounds or than any of future product candidates.

AbbVie has the right to market and sell products that compete with the product candidates that ENTA has licensed to it and any competition by AbbVie could also have a material adverse effect on ENTA's future business.

ENTA's lead antibiotic product candidate, EDP-788, is being developed as a broad-spectrum antibiotic with MRSA coverage for first line use in the hospital setting. In this treatment setting, if approved, EDP-788 would compete with a number of currently-marketed antibiotics, including Tygacil™ and Teflaro™, and antibiotics currently in Phase 3 development, including omadocycline/PTK-0796, a tetracycline under development by Paratek Pharmaceuticals, as well as delafloxicin being developed by Rib-X Pharmaceuticals.

ENTA expects that EDP-788 would also compete with currently marketed antibiotics used for serious, Gram-positive infections, including vancomycin, a generic drug that is manufactured by a variety of companies, Zyvox™, Cubicin™ and telavancin (Vibativ™).

In addition, a number of Gram-positive anti-infective product candidates currently in Phase 3 development could also compete with EDP-788 if they are approved, including dalbavancin (under development by Durata Therapeutics, Inc.), oritavancin (under development by The Medicines Company), tedizolid (under development by Trius Therapeutics, Inc.) and Taksta (under development by Cempra, Inc.).

ENTA's MRSA program faces competition from other therapeutic products that address serious Gram-positive bacterial infections, such as Cubicin®, marketed by Cubist; vancomycin, marketed generically by AbbVie, Shionogi and others; and Zyvox®, marketed by Pfizer, as well as future competition from drug candidates currently in clinical development.

5% STOCKHOLDERS, PRE-IPO
63% owned by VC firms pre-IPO
TVM V Life Science Ventures GmbH & Co. KG and affiliated entities, 19%
OBP III - Holdings LLC and affiliated entities, 12%
Shionogi & Co., Ltd, 12%
AbbVie Inc, 8%
Industry Ventures Fund VI, L.P, 7%
HBM Healthcare Investments (Cayman) Ltd, 7%
Private Equity Holding Cayman and affiliated entity, 6%

USE OF PROCEEDS
ENTA expects to net $52 million from its IPO. ENTA intends to use the IPO proceeds plus, if needed, cash on hand, as follows:

$37.0 million to initiate IND-enabling studies and clinical development through Phase 2a trials of a cyclophilin inhibitor candidate;

$17.0 million to initiate preclinical and clinical development through a Phase 1 trial of a nucleotide polymerase inhibitor candidate; and

Remaining proceeds, if any, to fund new research and development activities, working capital and other general corporate purposes.

Disclaimer: This ENTA IPO report is based on a reading and analysis of ENTA'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: Enanta Pharmaceutical