Seeking Alpha
, Google+ (438 clicks)
Long/short equity, special situations, momentum, event-driven
Profile| Send Message|
( followers)  

Karyopharm Therapeutics Inc. (NASDAQ:KPTI), a clinical-stage pharmaceutical company developing prospective treatments for cancer and other serious diseases, plans to raise $85 million in its upcoming IPO on Wednesday, November 6th. The Natick, MA-based firm will offer 5.7 million shares at an expected price range of $14-$16 per share. At the midpoint of that range at $15 per share, KPTI will command a market value of $414 million.

KPTI filed on October 4, 2013.
Lead Underwriters: BofA Merrill Lynch, Leerink Swann LLC
Underwriters: JMP Securities LLC, Oppenheimer & Co

Summary
Founded in 2008, Karyopharm Therapeutics is a pharmaceutical firm focused on the development of anti-cancer treatments. More specifically, the firm has developed novel small molecule, Selective Inhibitors of Nuclear Export (SINE), compounds that inhibit the nuclear export protein XPO1; the firm's lead drug candidate, Selinexor, is currently in the first stage of clinical trials. Some Selinexor trial patients have exhibited preliminary evidence of anti-cancer activities, and, equally importantly, the drug has been sufficiently well-tolerated by many patients' bodies to allow them to remain on the treatment for extended periods of time.

Valuation
KPTI offers the following figures in its S-1 balance sheet for the six months ending June 30, 2013:

Revenue: $366,000
Net Loss: ($12,480,000)
Total Assets: $18,477,000
Total Liabilities: $2,541,000
Stockholders' Equity: ($39,879,000)

It should be noted that, as a pre-commercial pharmaceutical firm, Karyopharm could hardly have been expected to turn a profit, nor should it be until its drugs have begun to be commercialized.

Business
KPTI must compete with other firms seeking to create and commercialize cancer treatments. Though we're not aware of any other firm attempting to use XPO1 inhibitors related to cancer research, there are numerous firms seeking alternative treatments.

Major competitors include Onyx Pharmaceuticals (NASDAQ:ONXX), Pfizer (NYSE:PFE), Roche Pharmaceuticals, Amgen (NASDAQ:AMGN), and Aveo Pharmaceuticals (NASDAQ:AVEO). Many of these competitors are better capitalized than KPTI, and several have established streams of income from previous successful treatments and are not reliant on the success of a single drug to propel them forward.

Management
Co-founder Michael G. Kauffman, M.D., Ph.D. has held the positions of President and CEO since 2011 and has served as Chief Medical Officer since late 2012. He previously worked as Chief Medical Officer of Onyx Pharmaceuticals and Proteolix Inc. Dr. Kauffman also previously served as an operating partner at Bessemer Venture Partners, where he led investments in biotechnology companies. Prior to that, he was President and CEO of Epix Pharmaceuticals and President and CEO of Predix Pharmaceuticals. Dr. Kauffman received his B.A. in Biochemistry from Amherst College, his M.D. and Ph.D. from Johns Hopkins Medical School, and trained in internal medicine and rheumatology at Beth Israel and Massachusetts General Hospitals.

Conclusion
Karyopharm, like other early-clinical trial pharmaceutical firms, is only appropriate for a small piece of aggressive investor's portfolio. The deal has also been accelerated by one day and will price tonight. Given the size of the market that KPTI addresses and the quality of management, we rate the IPO a buy in the price range of $14 to $16.

Investors will essentially be gambling on Selinexor's successful clinical trials and commercialization. Although the payoff potential is certainly immense - any effective new cancer treatment has the potential to be quickly monetized - there are quite a few stumbling blocks between the drug's current position and any payoff. The drug is still in stage one of clinical trials, meaning that it is still being tested for safety; later stages establishing efficacy have yet to be performed. Even if the drug did clear clinical trials, there's no guarantee that it will be a commercial success; new drugs face skepticism from the often hidebound medical community, and there's always the risk that another company will develop a superior or more marketable treatment, undermining Selinexor's marketability.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in KPTI over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: Karyopharm Therapeutics IPO Looks Promising