Glycomimetics IPO Is Risky But Promising

Nov. 6.13 | About: GlycoMimetics (GLYC)

Glycomimetics Inc (NASDAQ:GLYC), a pharmaceutical firm focused on discovering and developing glycomimetic drugs to treat illnesses related to carbohydrate biology, plans to raise $60 million in its upcoming IPO. The Gaithersburg, Maryland-based firm plans to offer 4.0 million shares at an expected price range of $14-$16 per share on Friday, November 8th. If the IPO can reach the midpoint of that range at $15 per share, GLYC will command a market value of $218 million.

GLYC filed on October 4, 2013.
Lead Underwriters: Barclays Capital Inc, Jefferies LLC
Underwriters: Canaccord Genuity Inc, Stifel Nicolaus & Company Inc

Summary
GLYC is a clinical-stage pharmaceutical firm involved in the development of drugs designed to address diseases related to carbohydrate biology. The firm's leading candidate, GMI-1070 (rivipansel sodium), is being developed to treat vaso-occlusive crisis (NYSE:VOC), an extremely severe complication of sickle cell disease that causes crippling pain periodically throughout the lifetime of a person with the disease; approximately 73,000 hospitalizations related to VOC in 2010, according the US Centers for Disease Control and Prevention.

GMI-1070, if approved, would be the first treatment designed to treat the underlying causes of VOC, rather than its symptoms. The firm completed a Phase 2 clinical trial in April of 2013 that demonstrated reduced times needed to reach resolution of VOC, reduce length of hospital stays, and reduced use of opioid analgesic pain medications.

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

Revenue: $3,862,665
Net Income: $3,027,604
Total Assets: $11,553,547
Total Liabilities: $1,815,343
Stockholders' Equity: $9,738,204

Business
There's a lot to be said for GMI-1070, GLYC's leading drug candidate. The drug has received fast-track designation from the FDA, meaning that it could soon be approved (and also indicating that the FDA believes that the drug has genuine promise). GMI-1070 also has been granted orphan drug status in both the United States and the European Union, a designation which offers numerous benefits to the company, including tax breaks. GLYC has already entered into an agreement with Pfizer (NYSE:PFE) under which Pfizer is responsible for further clinical development, regulatory approval and commercialization of GMI-1070; in exchange, GLYC received an up-front payment of $22.5 million, and is eligible to receive up to a further $115 million in development milestone payments, $70 million in regulatory milestone payments, and $135 million in commercial milestones, along with tiered royalties based on worldwide net sales of the drug.

GLYC must compete with other firms seeking to develop drugs for the treatment of VOC. Selexys Pharmaceuticals Corporation is in the process of developing a therapy to prevent VOC from occurring, and has announced that it is enrolled in a Phase 2 trial and that it has granted Novartis (NYSE:NVS) an option to acquire the company. Mast Therapeutics, Inc (NYSEMKT:MSTX), is in the midst of a Phase 3 trial of a drug designed to treat VOC once the crisis is already underway.

Management
President and CEO Rachel K. King is a co-founder of GLYC and has held her positions with the company since its founding in 2003. Ms. King previously was an Executive in Residence at New Enterprise Associates and served as a Senior Vice President of Novartis Corporation. Before joining Novartis, Ms. King worked with Genetic Therapy, Inc., where she served in a number of roles as part of the executive team, including CEO, which included the company's initial public offering and later acquisition by Novartis. After the acquisition by Novartis, she served as Chief Executive Officer of Genetic Therapy, which was then a wholly owned subsidiary of Novartis. She received a B.A. from Dartmouth College and an M.B.A. from Harvard Business School.

Conclusion
Despite the risks inherent in investing in clinical-stage pharmaceutical firms-the firm's drugs could fail to receive approval, competitors could develop superior treatments, and commercialization could potentially fail-we are optimistic on GLYC and recommend the IPO to aggressive investors if it prices in the $12 to $14 range.

GMI-1070's fast track status with the FDA indicates that there is a significant likelihood that the drug will be effective and will be approved quickly, and GLYC's lucrative collaboration with Pfizer should provide the firm with significant and stable revenue in coming years.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within 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.