Kindred Biosciences IPO Is Only For The Dogs

Dec.11.13 | About: Kindred Biosciences, (KIN)

Kindred Biosciences (NASDAQ:KIN), a clinical-stage animal biotech firm in the process of developing multiple pet therapeutics, plans to raise $40 million in its upcoming IPO. on Thursday, December 12th.

The Burlingame, California-based firm will offer 5.8 million shares at an expected price range of $6.00-$8.00 per share. If the IPO can reach the midpoint of that range at $7.00 per share, KIN will command a market value of $93 million. See- S-1

KIN filed on November 8, 2013
Lead Underwriters: BMO Capital Markets Corp and Guggenheim Securities

KIN is an early clinical-stage pet biotech firm dedicated to the development and commercialization of products designed to improve pet health. The firm is attempting to develop therapies for animals based on therapies already successful in humans, in the hopes of shorter development times and higher rates of approval.

KIN currently has three product candidates either in or near pivotal field efficacy trials: CereKin, for the treatment of osteoarthritis in dogs, AtoKin, for the treatment of atopic dermatitis in dogs, and SentiKin for the treatment of post-operative pain in dogs. Kin has an additional seven candidates in various stages of development.

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

Revenue: $0.00
Net Loss: ($1,829,670.00)
Total Assets: $11,364,946.00
Total Liabilities: $806,682.00
Stockholders' Equity: ($1,525,688.00)

As a clinical-stage biotech firm, KIN's non-existent revenue is to be expected; if the firm does eventually generate revenue, it will not be until at least one of its product candidates receives FDA approval and can be commercialized.

It should be noted that firms developing therapeutics for animals do not carry many of the risks associated with human therapeutic firms. Pet therapeutics require significantly fewer trials, can be tested directly in target species, and are subject to fewer regulations in general. Pet therapeutics enjoy a generally higher rate of FDA approval than human therapeutics.

KIN faces stiff competition from numerous animal health firms, including several with superior capitalization and far greater resources. These include Merck Animal Health (NYSE:MRK), Merial, Elanco (NYSE:LLY), Bayer Animal Health, Novartis Animal Health (NYSE:NVS), and Boehringer Ingelheim Animal Health.

President and CEO Richard Chin, M.D. Co-founded KIN and took his current positions in October 2012. His proposed salary is detailed on page 71 of the S-1 and seems very generous for a company that has no income let alone revenues.

He previously served as CEO of OneWorld Health and as President and CEO of Oxigene (OXGN). Dr. Chin is an adjunct professor at the University of California at San Francisco and serves on the boards of Galena Biopharma Inc (NASDAQ:GALE) and ImmunoCellular Therapeutics Ltd (NYSEMKT:IMUC) Dr. Chin received his M.D. from Harvard University and a law degree from Oxford University.

We would avoid KIN in the $6.00 to $8.00 range. We would be very surprised if these two junior underwriters get this IPO done in that proposed range.

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.