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Based in Monrovia, CA, Xencor (NASDAQ:XNCR) has scheduled a $75 million IPO with a market capitalization of $325 million on the Nasdaq at a price range midpoint of $15 for Friday, November 15, 2013.

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

S-1 filed November 4, 2013

Manager, Joint managers: Credit Suisse, Leerink Swann

Co-Manager: Wedbush PacGrow

Summary

XNCR is a clinical-stage biopharmaceutical company focused on discovering and developing engineered monoclonal antibodies to treat severe and life-threatening diseases with unmet medical needs.

There are currently five antibody product candidates in clinical trials that have been engineered with XmAb technology, including four candidates being advanced by licensees and development partners.

In December 2010, XNCR entered into a Collaboration and Option Agreement with Amgen for an option for the acquisition by Amgen of exclusive rights to XNCR's XmAb5871 product candidate and received an $11.0 million upfront payment.

Valuation

Accumulated deficit ($mm)

-$224 million

Valuation Ratios

Mrkt

Price /

Price /

Price /

Price /

% offered

Annualizing Sept 9 mos

Cap (MM)

Sls

Erngs*

BkVlue

TanBV

in IPO

Xencor

$326

29.1

-35.9

4.5

5.2

23%

* operating loss

Glossary

Conclusion

XNCR was founded in 1997 based on protein engineering technology developed by co-founders Bassil Dahiyat, PhD and Stephen Mayo, PhD at the California Institute of Technology.

XNCR began its first therapeutic monoclonal antibody engineering and discovery program in 2002 and entered into its first XmAb technology license in 2004.

After having accumulated an operating deficit of -$224 million, it seems like XNCR should have made more progress. The rating is neutral to negative.

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

Collaboration overview

XNCR's product development partnerships and technology licenses provided $60 million in cash during the last five years.

XNCR has the potential to receive an aggregate of $1.3 billion in milestone payments, in addition to royalties on sales, upon successful development and commercialization of the programs contemplated by the product development partnership and technology license agreements.

These potential milestone payments include $240 million relating to the achievement of clinical development milestones.

Business

XNCR is a clinical-stage biopharmaceutical company focused on discovering and developing engineered monoclonal antibodies to treat severe and life-threatening diseases with unmet medical needs.

XNCR uses its proprietary XmAb technology platform to create next-generation antibody product candidates designed to treat autoimmune and allergic diseases, cancer and other conditions, in contrast to conventional approaches to antibody design, which focus on the portion of antibodies that interact with target antigens,

XNCR focuses on the portion of the antibody that interacts with multiple segments of the immune system. This portion, referred to as the Fc domain, is constant and interchangeable among antibodies. XNCR's engineered Fc domains, the XmAb technology, can be readily substituted for natural Fc domains. XNCR believes its Fc domains enhance antibody performance by, for example, increasing immune inhibitory activity, improving cytotoxicity or extending circulating half-life, while typically maintaining over 99.5% identity in structure and sequence to natural antibodies. By improving over natural antibody function, XNCR believes that its XmAb-engineered antibodies offer innovative approaches to treating disease and potential clinical advantages over other treatments.

XNCR's business strategy is based on the plug-and-play nature of the XmAb technology platform to modify features of natural antibodies and create numerous differentiated antibody product candidates.

XNCR has internally generated a pipeline that has allowed it to selectively partner certain development programs while maintaining full ownership of other programs. XNCR also has a number of technology licenses under which it has licensed the XmAb technology platform to pharmaceutical and biotechnology companies for use in a limited number of programs, providing multiple revenue streams that require no further resources from Xencor.

There are currently five antibody product candidates in clinical trials that have been engineered with XmAb technology, including four candidates being advanced by licensees and development partners.

Amgen collaboration

In December 2010, XNCR entered into a Collaboration and Option Agreement with Amgen for an option for the acquisition by Amgen of exclusive rights to XNCR's XmAb5871 product candidate and received an $11.0 million upfront payment.

In January 2013, XNCR initiated a Phase 1b/2a clinical trial for XmAb5871 and received a $2.0 million milestone payment. XNCR expects to have preliminary results from the Phase 1b/2a trial treating patients with rheumatoid arthritis with active disease on stable non-biologic DMARD therapy in the second half of 2014.

XNCR expects to initiate the Phase 2b proof-of-concept trial in the first half of 2015 and complete the trial and deliver the clinical trial package to Amgen in 2017, following which Amgen will have 90 days to review the data and exercise its option.

Intellectual property

As of September 30, 2013, XNCR's XmAb technology platform is protected by 21 issued U.S. patents and 44 U.S. patent applications, in addition to foreign counterparts.

Competition

Competition in autoimmune disease drug development is intense and includes multiple monoclonal antibodies, other biologics and small molecules approved for the treatment of rheumatoid arthritis and autoimmune diseases, many of which are being developed or marketed by large multinational pharmaceutical companies, such as GlaxoSmithKline plc, AbbVie Inc., Janssen Pharmaceuticals, Inc., Genentech Inc. and Amgen Inc.

Benlysta is currently the only monoclonal antibody that XNCR is aware of that is approved for the treatment of lupus, although XNCR believes that Rituxan is prescribed, off label, for this indication.

Humira, Amgen's Enbrel (etanercept), Janssen Pharmaceuticals, Inc.'s Remicade (infliximab) and Simponi (golimumab), Orencia and Rituxan, among others, are approved for the treatment of rheumatoid arthritis. In addition, these and other pharmaceutical companies have monoclonal antibodies or other biologics in clinical development for the treatment of autoimmune diseases.

Many companies have approved therapies or are developing drugs for the treatment of asthma including multinational pharmaceutical companies such as GlaxoSmithKline, Novartis AG and AstraZeneca plc. Monoclonal antibody drug development has primarily focused on allergic asthma.

Xolair is currently the only monoclonal antibody that XNCR is aware of that is approved for the treatment of severe asthma. In addition, XNCR is aware that Novartis, AstraZeneca/MedImmune and Genentech each have an antibody targeting IgE in Phase 1 or 2 clinical development for asthma.

Other monoclonal antibodies in development target cytokines such as IL-13, IL-4, IL-5, IL-9, GM-CSF or their receptors.

Although these drugs function differently from XNCR's products, if successfully developed, these drugs will compete in the asthma market. XNCR is not aware of any companies developing drugs that target FcgRIIb for the treatment of asthma.

5% stockholders

MedImmune Ventures, Inc. 8%

HealthCare Ventures VIII, L.P. 6%

John S. Stafford III 45%

John Stafford, Jr. 10%

James Stafford 6%

Use of proceeds

XNCR expects to net $67.3 million from its IPO. Proceeds are allocated as follows:

$19.3 million to fund the continued clinical development of XmAb5871 through a planned Phase 2b clinical trial;

$21.7 million to fund initial clinical development of XmAb7195 through a planned Phase 1b clinical trial;

$15.8 million to fund product candidate discovery, technology development and patent prosecution activities; and

the remainder for working capital and other general corporate purposes, including the additional costs associated with being a public company.

Disclaimer: This XNCR IPO report is based on a reading and analysis of XNCR'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: Xencor