Seeking Alpha
, IPOpremium (1,446 clicks)
Value, IPOs, long only
Profile| Send Message|
( followers)  

Based in Burlingame, CA, Kindred Biosciences (NASDAQ:KIN) scheduled a $40 million IPO on the Nasdaq with a market capitalization of $93 million at a price range midpoint of $7 for Thursday, December 12, 2013.

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

SEC Documents

Manager, Joint managers: BMO Capital Markets, Guggenheim Securities

Co-Managers: None

Summary

KIN is a development stage biopharmaceutical company focused on saving and improving the lives of pets.

KIN's core strategy is to identify compounds and targets that have already demonstrated safety and efficacy in humans and to develop therapeutics based on these validated compounds and targets for pets, primarily dogs, cats and horses.

KIN's lead product candidates are CereKin for the treatment of osteoarthritis pain and inflammation in dogs; AtoKin for the treatment of atopic dermatitis in dogs; and SentiKin for the treatment of post-operative pain in dogs.

However, see 'Competition' below.

Valuation

Immediate per share dilution to IPO shareholders

($3.5)

Valuation Ratios

Mrkt

Price /

Price /

Price /

Price /

% offered

annualizing June 6 mos

Cap (MM)

Sls

Erngs

BkVlue

TanBV

in IPO

Kindred Biosciences

$93

none

-38.8

2.0

2.0

44%

SCORECARD

Mgt

Market

Market Do-

Proprie-

Total

1-5, 5 is high

Grwth

mination

tary

rating

20 is perfect

2

2.5

0

1.5

C, 6

Glossary

Conclusion
The rating on KIN is neutral. KIN is a public venture capital deal.

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

Business
KIN is a development stage biopharmaceutical company focused on saving and improving the lives of pets.

KIN's mission is to bring to pets the same kinds of safe and effective medicines that human family members enjoy.

KIN's core strategy is to identify compounds and targets that have already demonstrated safety and efficacy in humans and to develop therapeutics based on these validated compounds and targets for pets, primarily dogs, cats and horses.

KIN believes this approach will lead to shorter development times and higher approval rates than pursuing new, non-validated compounds and targets.

Multiple product candidates
KIN believes there are significant unmet medical needs for pets, and that the pet therapeutics segment of the animal health industry is likely to grow substantially as new therapeutics are identified, developed and marketed specifically for pets.

KIN has three product candidates that are in, or will shortly enter, pivotal field efficacy trials, or pivotal trials, and expect approval of one or more of these product candidates in 2015.

In addition, KIN has seven other product candidates, including several biologics, in various stages of development.

Osteoarthritis, dermatitis, post-operative pain
KIN's lead product candidates are CereKin for the treatment of osteoarthritis pain and inflammation in dogs; AtoKin for the treatment of atopic dermatitis in dogs; and SentiKin for the treatment of post-operative pain in dogs.

All of these product candidates, if approved, would be first-in-class drugs in the pet therapeutic market.

Clinical trials
In August 2013, KIN initiated the pivotal trial for CereKin, and KIN expects to initiate the pivotal trials for AtoKin and SentiKin by early 2014.

KIN has received from the U.S. Food and Drug Administration, or FDA, Protocol Concurrences for CereKin and AtoKin, and expect to receive a similar Protocol Concurrence for SentiKin.

A Protocol Concurrence in animal drug development is analogous to a Special Protocol Assessment in human drug development, and means that the FDA fundamentally agrees with the design, execution and analysis proposed in a protocol, and will not later alter its perspective on these issues unless public or animal health concerns appear that were not recognized at the time of protocol assessment.

Assuming positive results from these trials, KIN intends to submit New Animal Drug Applications, or NADAs, for marketing approval of CereKin, AtoKin and SentiKin in the United States starting in 2014, and anticipates potential marketing approvals and product launches in the second half of 2015.

If approved in the United States, KIN may make similar regulatory filings for these products with the European Medicines Agency, or EMA, for marketing approval in the European Union, or EU.

Intellectual property

KIN currently has no issued patents and has only provisional patent applications. Because most of the current product candidates, including all of the current small molecule product candidates, are based on generic human drugs, there is little, if any, composition-of-matter patent protection available for the API in such product candidates.

Competition

While there are fewer competitors in the pet therapeutics industry than in the human pharmaceutical industry, the development and commercialization of new animal health medicines is highly competitive, and KIN expects considerable competition from major pharmaceutical, biotechnology and specialty animal health medicines companies.

KIN's potential competitors include large animal health companies, which currently derive the majority of their revenue from livestock medications. For example, in 2012 livestock accounted for 65%, and pets 35%, of sales for Zoetis, a large company focused on animal health. Within the pet therapeutics market, vaccines and parasiticides are currently the greatest sources of revenue.

Large animal health companies include Merck Animal Health, the animal health division of Merck & Co., Inc.; Merial, the animal health division of Sanofi S.A.; Elanco, the animal health division of Eli Lilly and Company; Bayer Animal Health, the animal health division of Bayer AG; Novartis Animal Health, the animal health division of Novartis AG; Boehringer Ingelheim Animal Health, the animal health division of Boehringer Ingelheim GmbH; and Zoetis, Inc.

KIN will also compete against several animal health companies in Europe, such as the Virbac Group, Ceva Animal Health and Dechra Pharmaceuticals PLC. KIN is also aware of several smaller early stage companies that are developing products for use in the pet therapeutics market, including Aratana Therapeutics, Inc.

At the product level, KIN will face competition for CereKin and SentiKin (for pain) from Rimadyl, Deramaxx, Previcox, Equioxx and Metacam, as well as potentially from additional products in development.

KIN will face competition for AtoKin and KIND-502 from Atopica, Apoquel, and steroids, as well as potentially from additional products in development.

For KIN's other products, KIN may face competition from various products including additional products in development. KIN's products will also face competition from generic medicines and products approved for use in humans that are used extra-label for pets. For example, AtoKin, KIN's second product candidate, will face competition from fexofenadine, a human generic available in the United States. Some of KIN's other products also may face competition from their human generic equivalents in countries where such equivalents are available.

5% stockholders

Richard Chin, M.D. 42.21%

Oleg Nodelman 6.89%

Adage Capital Partners 12.47%

EcoR1 Capital Fund 6.23%

The David T. Chang and Gloria Lowe Chang Revocable Trust of 2009 5.38%

Use of proceeds

KIN expects to net $36.4 million from its IPO. Proceeds are allocated as follows:

$3 million to $5 million each to complete the clinical development of: CereKin for the treatment of osteoarthritis pain in dogs; AtoKin for the treatment of atopic dermatitis in dogs; and SentiKin for the treatment of post-operative pain in dogs; and

the balance, together with KIN's existing cash and cash equivalents, to establish KIN's commercial infrastructure within the United States once one or more of its product candidates obtains marketing approval and for other general corporate and working capital purposes.

Disclaimer: This KIN IPO report is based on a reading and analysis of KIN'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.

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. I have no business relationship with any company whose stock is mentioned in this article.

Source: IPO Preview: Kindred Biosciences