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Relypsa Inc. (NASDAQ:RLYP), a biotech firm in the final stages of gaining approval for its lead candidate for the treatment of hyperkalemia, plans to raise $119.9 million in its upcoming IPO. The Redwood City, California-based firm will offer 6.9 million shares at an expected price range of $16-$19 per share. If the IPO can reach the midpoint of that range at $17.50 per share, Relypsa will command a market value of $502 million.

RLYP filed on November 27, 2013.
Lead Underwriters: BofA Merrill Lynch, Morgan Stanley & Co. LLC
Underwriters: Cowen and Company LLC, Stifel Nicolaus & Company Inc., Wedbush Securities Inc.

Summary

Relypsa is a late-stage biotech firm seeking to develop and commercialize non-absorbed polymeric drugs to treat renal, cardiovascular and metabolic diseases. The firm's lead product candidate, patiromer, has completed its two-part Phase 3 trial with statistically significant and clinically meaningful results.

Patiromer is designed to treat hyperkalemia, a life-threatening condition that consists of abnormally elevated levels of potassium in the blood. Relypsa expects to submit a New Drug Application for Patiromer in 2014, and has royalty-free commercialization rights to the drug. Patiromer will have intellectual property protection in the US until at least 2030. After the FDA approves Patiromer, the firm plans to commercialize the drug with a sales force of approximately 100, and will market the drug to nephrologists and cardiologists.

Valuation

RLYP offers the following figures in its S-1 balance sheet for the nine months ending September 30, 2013:

Revenue: $0.00
Net Loss: ($72,106,000)
Total Assets: $25,957,000
Total Liabilities: $65,314,000
Stockholders' Equity: ($216,775,000)

As a clinical-stage biotech firm, Relypsa's revenue and income figures should come as no surprise; the firm can't be expected to turn profitable until its drug candidates are approved and hit the market.

Business

Relypsa must compete with much larger biotech and pharmaceutical firms seeking to develop superior methods of treating hyperkalemia, along with academic and governmental organizations that may do the same. ZS Pharma is in the process of developing another treatment for hyperkalemia that is currently in Phase 3 trials.

Management

President and CEO John A. Orwin joined Relypsa in June 2013. Mr. Orwin previously served as President, COO, and CEO of Affymax Inc. (OTCQB:AFFY), a biotechnology company, and as Senior Vice President of the BioOncology Business Unit at Genentech, Inc. He has also served in various executive-level positions at Johnson & Johnson (NYSE:JNJ), Alza Corporation, Sangstat Medical Corporation, Rhone-Poulenc Rorer Pharmaceuticals Inc., and Schering-Plough Corporation. Mr. Orwin holds a B.A. in Economics from Rutgers University and an M.B.A. from New York University.

Conclusion

Relypsa looks to be an interesting Biotech IPO for aggressive investors. We rate this IPO a buy in the $15 to $17 range.

Patiromer seems almost certain to be approved given the FDA's special attention and its successes in stage 2 and 3 trials, and is likely to be extremely popular among the doctors of hyperkalemia sufferers, since the only currently available medication is poorly tolerated by patients and has significant negative side effects. Whereas most clinical-stage biotech and pharma firms make for risky IPOs, this one looks like a good bet in small quantities.

Source: Relypsa IPO Is An Exciting Biotech Firm