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Offering Details

Dicerna Pharmaceuticals Inc. (NASDAQ:DRNA), a biopharmaceutical firm seeking to discover and develop treatments for inherited, liver-related diseases and genetically defined cancers, plans to raise $60 million in its upcoming IPO on January 31, 2014. See S-1 here.

The Watertown, Massachusetts-based firm will offer 5.0 million shares at an expected price range of $11-$13 per share. If the IPO can find the midpoint of that range at $12 per share, DRNA will command a market value of $188 million.

DRNA filed on December 31, 2013.
Lead Underwriters: Jefferies LLC, Leerink Partners LLC, Stifel Nicolaus & Company Inc
Underwriters: Robert W. Baird & Co Inc

Business Summary

DRNA is a pre-clinical biopharm firm, seeking to discover, develop and commercialize novel therapeutics for rare inherited diseases involving the liver and genetically defined cancers.

The firm is attempting to build a broad development pipeline, based on its RNA interference technology platform. Its development programs include treatments for Primary Hyperoxaluria 1 (PH1), an extremely rare disorder that causes severe renal disease and leads to early mortality; DRNA has had success in reducing the key pathology of PH1 in the mouse genetic model and intends to begin clinical trials of its treatment, DCR-PH1, in 2015. DNRA intends to use a similar approach to investigate other rare diseases involving disease target genes expressed in the liver.

In addition, the company is developing a treatment for various cancers, involving the targeting of the MYC oncogene, which causes or promotes cancer through abnormal expression or activation. The firm plans to initiate trials of its DCR-M1711 treatment, which inhibits MYC, in the first half of 2014. Finally, DRNA is developing a product candidate to target the KRAS oncogene, which is frequently mutated in numerous major cancers, in collaboration with Kyowa Hakko Kirin Co, Ltd (KHK). Dicerna Pharmaceuticals plans to retain commercial rights for treatments of relatively rare diseases and partner with other firms to commercialize treatments, which will require a larger sales force.

Valuation

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

Revenue: $0.00
Net Loss: ($11,799,000.00)
Total Assets: $56,072,000.00
Total Liabilities: $8,403,000.00
Stockholders' Equity: ($62,568,000.00)

As a pre-clinical biopharmaceutical firm, DRNA's lack of revenue is unsurprising. The firm should not be expected to generate income until it has received approval for and commercialized at least one of its product candidates.

Numerous Competitors

DRNA faces competition from several major pharmaceutical firms working in RNA interference therapeutics, including Novartis International AG (NYSE:NVS), Takeda Pharmaceutical Company Ltd., and Merck & Co Inc (NYSE:MRK). These firms all have much greater financial muscle than DRNA. Other competitors include biopharm firms like Alnylam Pharmaceuticals (NASDAQ:ALNY), Tekmira Pharmaceuticals Corporation (NASDAQ:TKMR), Arrowhead Research Corporation (NASDAQ:ARWR), Silence Therapeutics plc, RXi Pharmaceuticals Corporation (OTC:RXII), Quark Pharmaceuticals Inc, and Marina Biotech Inc (OTCQB:MRNA).

Accomplished Management

CEO Douglas M. Fambrough III, Ph.D. has served as a director since April 2007 and as CEO since 2010. He previously held various positions at Oxford Bioscience Partners, a life science venture capital firm, most recently as a general partner.

He also spent time as a genomic scientist at the Whitehead/MIT Center for Genome Research (now known as the Broad Institute). Dr. Fambrough graduated from Cornell University and holds his Ph.D. in genetics from the University of California, Berkeley.

DNRA is A Risky Bet But Existing Shareholders Want More Creating Trading Opportunity

DRNA is a serious gamble long term but we rate this IPO a trading buy for three primary reasons. One, on page 6 of the second amendment of the S-1, the existing shareholders have indicated that they have an interest in purchasing $35,000,000 of the deal. If this occurs, the remaining IPO investors will have very little remaining supply to purchase. Two, the company is focused on cancer and has a strong collaboration with Kyowa Hakko Kirin Co. Three, this deal is one of the first biotech's out of the gate this year.

The firm is a long way from commercializing any of its products; as noted above, none of its candidates will even begin clinical trials until later this year, and there's no guarantee that they will be successful in trial, or that they will be commercially viable even in the event of regulatory success. The rarity of some of the diseases addressed by DRNA's treatments (like PH1) and the proliferation of treatments for the cancers addressed by its candidates are also of concern. DRNA is hardly the only firm developing RNA interference-based treatments, and many of its competitors are significantly more potent in terms of capitalization and reputation.

Source: Dicerna Pharma IPO: Existing Stockholders Want To Buy Majority Of Deal