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Based in Shelton, CT, Cara Therapeutics (NASDAQ:CARA) scheduled a $60 million IPO on the Nasdaq with a market capitalization of $262 million at a price range midpoint of $12 for Friday, January 31, 2014.

The full IPO calendar is available at IPOpremium.com

SEC Documents

Manager, Joint Managers: Stifel, Piper Jaffray

Co-Managers: Canaccord Genuity, Needham & Company, Janney Montgomery Scott

End of lockup (180 days): Wednesday, July 30, 2014

Summary

CARA is a clinical-stage biopharmaceutical company focused on developing and commercializing new chemical entities designed to alleviate pain by selectively targeting kappa opioid receptors.

CARA's most advanced product candidate, intravenous, or I.V., CR845, has demonstrated significant pain relief and favorable tolerability in three Phase 2 clinical trials in patients with acute postoperative pain.

CARA plans to begin Phase 3 registration trials for I.V. CR845 in the second half of 2014.

CARA is also developing an oral version of CR845, or Oral CR845, for acute and chronic pain, for which CARA has successfully completed a Phase 1 clinical trial to demonstrate the ability to deliver CR845 orally.

Valuation

Glossary

Valuation Ratios

Mrkt

Price /

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% offered

annualizing Sept 9 mos '13

Cap (MM)

Sls

Erngs

BkVlue

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in IPO

Cara Therapeutics

$262

71.3

-109.0

3.9

3.9

23%

Conclusion

CARA has an impressive venture capital investor list, has several partnerships, plans to initiate a Phase 3 clinical trial in the latter half of 2014, and successfully completed a Phase 1 clinical trial for oral delivery.

The price-to-book value of 3.9 is a little high, but is in the reasonable range given the foregoing and because "Certain of our existing principal stockholders and their affiliated entities have indicated an interest in purchasing an aggregate of up to approximately $8.0 million in shares of our common stock in this offering at the initial public offering price." (cover page)

The rating on CARA is a buy on the IPO.

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

Business

CARA is a clinical-stage biopharmaceutical company focused on developing and commercializing new chemical entities designed to alleviate pain by selectively targeting kappa opioid receptors.

CARA is developing a novel and proprietary class of product candidates that target the body's peripheral nervous system and have demonstrated efficacy in patients with moderate-to-severe pain without inducing many of the undesirable side effects associated with currently available pain therapeutics.

CARA's most advanced product candidate, intravenous, or I.V., CR845, has demonstrated significant pain relief and favorable tolerability in three Phase 2 clinical trials in patients with acute postoperative pain.

CARA plans to begin Phase 3 registration trials for I.V. CR845 in the second half of 2014. CARA is also developing an oral version of CR845, or Oral CR845, for acute and chronic pain, for which CARA has successfully completed a Phase 1 clinical trial to demonstrate the ability to deliver CR845 orally.

How CARA has financed itself

To date, CARA has financed its operations primarily through sales of its equity and debt securities and payments from license agreements.

CARA has no products currently available for sale, and substantially all of its revenue to date has been revenue from license agreements, although CARA has received nominal amounts of revenue under research grants.

Since its inception and through September 30, 2013, CARA has received net proceeds of $65.9 million from the sale of various series of convertible preferred stock, $3.9 million from the issuance of convertible promissory notes and $3.8 million from the issuance of long-term debt.

In addition to its financing activities, CARA has received aggregate payments of $28.8 million pursuant to license agreements related to CR845 and an earlier product candidate for which development efforts ceased in 2007.

In April 2013, CARA received $15.0 million as an upfront payment pursuant to a license agreement with Maruishi Pharmaceutical Co., Ltd., or Maruishi, in connection with the license of rights to CR845 in Japan.

In 2012, CARA received aggregate upfront and milestone payments of $1.2 million pursuant to a license agreement with Chong Kun Dang Pharmaceutical Corporation, or CKD, in connection with the license of rights to CR845 in South Korea.

More on Collaborations with Maruishi and CKD

Maruishi

To date, CARA has entered into two license agreements relating to the development of CR845.

In April 2013, CARA entered into a license agreement with Maruishi, under which CARA granted Maruishi an exclusive license to develop, manufacture and commercialize drug products containing CR845 in Japan in the acute pain and uremic pruritus fields.

CARA and Maruishi are required to use commercially reasonable efforts, at their respective expense, to develop, obtain regulatory approval for and commercialize CR845 in the United States and Japan respectively.

In addition, CARA will provide Maruishi specific clinical development services for CR845 in Maruishi's field of use. Under the terms of the agreement, CARA received a non-refundable and non-creditable upfront license fee of $15.0 million and is eligible to receive up to an aggregate of $6.0 million in clinical development milestones and $4.5 million in regulatory milestones.

CARA is also eligible to receive tiered royalties, with percentages ranging from the low double-digits to the low twenties, based on net sales of products containing CR845 in Japan, if any, and share in any sub-license fees. In addition, in connection with the license agreement, Maruishi purchased 2,105,263 shares of CARA's Junior A Preferred Stock for $3.80 per share for an aggregate purchase price of $8.0 million.

CKD

In April 2012, CARA entered into a license agreement with CKD, under which CARA granted CKD an exclusive license to develop, manufacture and commercialize drug products containing CR845 in South Korea.

CARA and CKD are required to use commercially reasonable efforts, at their respective expense, to develop, obtain regulatory approval for and commercialize CR845 in the United States and South Korea, respectively.

Under the terms of the agreement, CARA received a non-refundable and non-creditable upfront license fee of $0.6 million and is eligible to receive up to an aggregate of $2.3 million in clinical development milestones and $1.5 million in regulatory milestones.

CARA also issued 173,611 shares of CARA's Junior Preferred Stock to CKD in consideration for $0.4 million. During 2012, CARA received $0.6 million from CKD upon the achievement of clinical development milestones under the license agreement.

CARA is also eligible to receive tiered royalties, with percentages ranging from the high single-digits to the high teens, based on net sales of products containing CR845 in South Korea, if any, and share in any sub-license fees.

Intellectual property

CR845 was discovered by CARA's scientists. CARA owns six U.S. patents with claims covering compositions of matter and methods of use for CR845. The earliest U.S. patent claiming CR845 compositions will expire no earlier than November 12, 2027.

Competition

The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products.

While CARA believes that its technology, knowledge, experience and scientific resources provide it with competitive advantages, CARA faces potential competition from many different sources, including large pharmaceutical and biotechnology companies, specialty pharmaceutical and generic drug companies, and medical technology companies.

Any product candidates that CARA successfully develops and commercializes will compete with existing therapies and new therapies that may become available in the future.

5% stockholders

Esperante AB 9.2%

Ascent Biomedical Ventures 9.9%

Alta BioPharma Partners 10.7%

MVM International Life Sciences No. 1 L.P. 9.7%

Healthcare Private Equity Limited Partnership 5.3%

Devon Park Bioventures LP 9.4%

Rho Ventures VI, L.P 14.5%

Derek Chalmers, Ph.D. 6.8%

Charles Moller, Ph.D. 7.2%

Use of proceeds

CARA expects to net $52.9 million from its IPO. Proceeds are allocated as follows:

$44 million to conduct its planned Phase 3 clinical trials and other development activities for I.V. CR845;

$2.1 million to conduct its planned Phase 1 clinical trial for Oral CR845;

$4.6 million to conduct its planned Phase 2a clinical trials and other development activities for Oral CR845; and

the remainder for working capital and other general corporate purposes.

Disclaimer: This CARA IPO report is based on a reading and analysis of CARA'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: Cara Therapeutics