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Based in Redwood City, CA, Relypsa (NASDAQ:RLYP) scheduled a $120 million IPO with a market capitalization of $502 million on the Nasdaq at a price range midpoint of $17.50 for Thursday, November 14, 2013.

Ten operating company IPOs scheduled for this week. The full IPO calendar can be found at IPOpremium.

S-1 filed November 1, 2013

Manager, Joint managers: Morgan Stanley, BofA Merrill Lynch

Co-Managers: Cowen & Company, Stifel, Wedbush PacGrow

Summary

RLYP is a pharmaceutical company focused on the development and commercialization of non-absorbed polymeric drugs to treat disorders in the areas of renal, cardiovascular and metabolic diseases.

RLYP has completed its two-part pivotal Phase 3 trial of its lead product candidate, patiromer, for the treatment of hyperkalemia, a life-threatening condition defined as abnormally elevated levels of potassium in the blood.

Each part of this trial met both its primary and secondary efficacy endpoints, with the results being both statistically significant and clinically meaningful.

Valuation

Accumulated deficit ($mm)

-$219mm

Valuation Ratios

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Annualizing Sept 9 mos

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Sls

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in IPO

Glossary

Conclusion

Because RLYP has completed its Phase 3 clinical trial, and because the competition appears limited, the rating is neutral.

To put the conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced above:

Business
RLYP is a pharmaceutical company focused on the development and commercialization of non-absorbed polymeric drugs to treat disorders in the areas of renal, cardiovascular and metabolic diseases.

Pivotal Phase 3 trial

RLYP has completed its two-part pivotal Phase 3 trial of its lead product candidate, patiromer, for the treatment of hyperkalemia, a life-threatening condition defined as abnormally elevated levels of potassium in the blood.

The design of this pivotal Phase 3 trial was agreed to under a special protocol assessment, or SPA, with the U.S. Food and Drug Administration, or FDA.

Each part of this trial met both its primary and secondary efficacy endpoints, with the results being both statistically significant and clinically meaningful.

RLYP expects to submit a New Drug Application, or NDA, in the third quarter of 2014. Patiromer is a non-absorbed, optimized potassium binding polymer administered as a convenient oral suspension powder.

In its clinical program, RLYP has observed that daily administration of patiromer lowered, and maintained control of, serum potassium levels into the normal range in hyperkalemic subjects and was well tolerated.

RLYP has global royalty-free commercialization rights to patiromer, which has intellectual property protection in the U.S. until at least 2030. Upon FDA approval, RLYP plans to commercialize patiromer for the treatment of hyperkalemia in the U.S. with an approximately 100 person specialty sales force targeting nephrologists and cardiologists.

Hyperkalemia
Hyperkalemia, which can present chronically or acutely, can lead to severe medical complications, including life-threatening cardiac arrhythmias and sudden death.

Hyperkalemia is typically defined as a serum potassium, or potassium in the blood, level greater than 5.0 milliequivalents per liter (mEq/L). Patients with serum potassium greater than or equal to 5.5 mEq/L, which RLYP defines as moderate-to-severe hyperkalemia, were found in an independent study to have a 10-fold increase in their mortality rate within 24 hours.

Causes and risk factors for hyperkalemia include reduced renal function, diabetes, extensive soft tissue injury, age, high dietary potassium intake and the use of medications such as renin-angiotensin-aldosterone system, or RAAS, inhibitors.

Hyperkalemia occurs most frequently in patients with chronic kidney disease, or CKD, where the ability of the patient's kidney to excrete potassium has been compromised.

Treatment guidelines recommend the use of RAAS inhibitors to preserve kidney function and delay the progression of renal failure to end stage renal disease, or ESRD; however, RAAS inhibitors have the well-recognized side effect of causing or worsening hyperkalemia, thereby limiting their use.

In addition to CKD patients, hyperkalemia is also observed in heart failure, or HF, patients, for whom RAAS inhibitors have demonstrated a decrease in all-cause mortality.

Intellectual property

The patents and patent applications relating to patiromer are all owned by Relypsa. The issued composition of matter patents (U.S. Patent Nos. 8,147,873, 8,282,913, and 8,337,824), if the appropriate maintenance fees are paid, are expected to expire between 2026 and 2030.

The issued methods of treatment patents (U.S. Patent Nos. 7,556,799, 8,216,560, 8,287,847, and 8,475,780), if the appropriate maintenance fees are paid, are expected to expire between 2024 and 2027.

If additional patent term for one of the patiromer U.S. patents is awarded as a result of the patent term extension provision of the Hatch-Waxman Amendments of 1984, or the Hatch-Waxman Act, the term of the patent would not extend beyond 2030. RLYP expects that the patent applications in this portfolio, if issued, and if appropriate maintenance, and other governmental fees are paid, would expire between 2024 and 2030, excluding any additional term from patent term adjustment or patent term extension.

Competition
Other companies may also develop drugs specifically for the treatment of hyperkalemia. RLYP is currently aware of one other company, ZS Pharma, Inc., which is developing potassium removal medications.

RLYP does not know whether these medications will be introduced to the market and if so, the timing or success of such introduction. However, in the event that ZS Pharma, or other companies developing treatment options for hyperkalemia, are successful, RLYP will face additional competition for patiromer.

5% stockholders

OrbiMed Private Investments IV, LP 44%

Entities affiliated with 5AM Ventures 22.6%

Entities affiliated with Delphi Ventures 11.4%

New Leaf Ventures I, L.P. 10.1%

Entities affiliated with Sprout Capital 9.4%

Individuals and entities affiliated with Sibling Capital 6.0%

Use of proceeds

RLYP expects to net $108.5 million from its IPO. Proceeds are allocated as follows:

$15 to $20 million for development costs relating to the validation of its commercial manufacturing process and other expenses related to preparing for commercial production of patiromer;

$25 to $30 million for manufacturing commercial supply of patiromer;

$15 to $20 million for development costs to prepare and submit its New Drug Application, or NDA, for patiromer, and to support its activities during the FDA's review and approval process;

$10 to $15 million for pre-commercialization marketing activities for patiromer; and

any remaining proceeds for working capital and general corporate purposes.

Disclaimer: This RLYP IPO report is based on a reading and analysis of RLYP'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: Relypsa