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Based in Durham, NC, Argos Therapeutics (NASDAQ:ARGS) scheduled a $60 million IPO on the Nasdaq with a market capitalization of $247 million at a price range midpoint of $14 for Friday, February 7, 2014.

The full IPO calendar is available at IPOpremium.com

Conclusion
Buy on the IPO: in phase 3 trials, low price/book, cash burn rate okay relative to other biopharmas. See valuation.

SEC Documents
Manager, Joint managers: Piper Jaffray, Stifel, JMP Securities

Co-Managers: Needham & Co.

End of lockup (180 days): Wednesday, August. 6, 2014

Summary

ARGS is a biopharmaceutical company focused on the development and commercialization of fully personalized immunotherapies for the treatment of cancer and infectious diseases based on its proprietary technology platform called Arcelis.

ARGS's most advanced product candidate is AGS-003, which ARGS is developing for the treatment of metastatic renal cell carcinoma, or mRCC, and other cancers.

ARGS is currently enrolling patients in a pivotal phase 3 clinical trial of AGS-003 in combination with sunitinib (Sutent) for the treatment of clear cell mRCC.

Valuation

Glossary

Cash burn rate: When a company loses money with minimal depreciation and amortization (think biopharmas), the negative Price/Loss ratio is an indication of cash burn rate. The higher the loss the lower the absolute (negative) ratio. The lower the loss the higher the absolute (negative) ratio.

Valuation Ratios

Mrkt

Price /

Price /

Price /

Price /

% offered

annualizing Sept. 9 mos

Cap (MM)

Sls

Erngs

BkVlue

TanBV

in IPO

Argos Therapeutics

$248

200.9

-11.6

2.5

2.5

24%

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

Business

ARGS is a biopharmaceutical company focused on the development and commercialization of fully personalized immunotherapies for the treatment of cancer and infectious diseases based on its proprietary technology platform called Arcelis.

ARGS's most advanced product candidate is AGS-003, which ARGS is developing for the treatment of metastatic renal cell carcinoma, or mRCC, and other cancers.

Clinical trials

ARGS is currently enrolling patients in a pivotal phase 3 clinical trial of AGS-003 in combination with sunitinib (Sutent) for the treatment of clear cell mRCC under a special protocol assessment, or SPA, with the Food and Drug Administration, or FDA. ARGS also plans to conduct phase 2 clinical trials to explore the use of AGS-003 in non-clear cell mRCC, in early stage RCC prior to and following nephrectomy, and in other solid tumors.

ARGS is developing its second Arcelis product candidate, AGS-004, for the treatment of HIV and are conducting a phase 2b clinical trial of AGS-004 that is being funded entirely by the National Institutes of Health, or NIH, under a $39.3 million contract.

In addition, ARGS expects two phase 2 clinical trials of AGS-004 to be initiated in 2014, one for HIV eradication and one for long-term viral control in pediatric patients.

Revenue expectations

ARGS does not expect to generate significant funds or product revenue, other than under its contract with the NIH as described below, unless and until we successfully complete development, obtain marketing approval and commercialize its product candidates, either alone or in collaboration with third parties, which ARGS expects will take a number of years and is subject to significant uncertainty.

NIH Funding

In September 2006, ARGS entered into a multi-year research contract with the NIH and the National Institute of Allergy and Infectious Diseases, or NIAID, to design, develop and clinically test an autologous HIV immunotherapy capable of eliciting therapeutic immune responses.

ARGS is using funds from this contract to develop AGS-004, including to fund in full its phase 2b clinical trial of AGS-004.

Under this contract, as amended, the NIH and NIAID has committed to fund up to a total of $39.3 million, including reimbursement of direct expenses and allocated overhead and general and administrative expenses of up to $37.9 million and payment of other specified amounts totaling up to $1.4 million upon its achievement of specified development milestones. This commitment extends to September 2015.

Intellectual property

ARGS owns or exclusively licenses 12 U.S. patents and nine U.S. patent applications, as well as 60 foreign counterparts, covering its Arcelis technology platform and Arcelis-based product candidates.

ARGS uses its Arcelis technology platform to generate fully personalized mRNA-loaded dendritic cell immunotherapies.

Competition

Historically, mRCC was treated with chemotherapy, radiation and hormonal therapies, as well as cytokine-based therapies such as interferon-a and IL-2.

More recently, the FDA has approved several targeted therapies as monotherapies for mRCC, including Nexavar, marketed by Bayer Healthcare Pharmaceuticals, Inc. and Onyx Pharmaceuticals, Inc., Sutent and Inlyta, marketed by Pfizer, Inc., Avastin, marketed by Genentech, Inc., a member of the Roche Group, and Votrient, marketed by GlaxoSmithKline.

Other recently approved targeted therapies for the treatment of mRCC are Torisel, marketed by Pfizer, and Afinitor, marketed by Novartis Pharmaceuticals Corporation.

ARGS believes that each of these existing therapies has efficacy or safety limitations and, as a result, that there remains an unmet need for novel therapeutic approaches for mRCC that can improve efficacy without adding appreciable toxicity.

5% stockholders

Pharmstandard International S.A. 35.1%

Entities affiliated with Forbion(2)18.0%

TVM V Life Science Ventures GmbH &Co. 10.7%

Entities affiliated with Lumira Capital 9.0%

Entities affiliated with Intersouth Partners 7.8%

Caisse de dépôt et placement du Québec 5.4%

Use of proceeds

ARGS expects to net $52.7 million from its IPO. Proceeds, together with cash, cash equivalents and short-term investments, are allocated as follows:

  • $37 million to fund the direct costs of its pivotal phase 3 clinical trial of AGS-003 for the treatment of metastatic renal cell carcinoma, or mRCC;
  • $2 million to fund the direct costs of the planned phase 2 clinical trials of AGS-003 in non-clear cell mRCC, early stage RCC prior to and following nephrectomy and other solid tumors;
  • $1.6 million to fund the manufacturing costs of the planned phase 2 clinical trial of AGS-004 for HIV eradication and the direct costs of its planned phase 2 clinical trial of AGS-004 for long-term viral control in pediatric patients, assuming ARGS does not obtain NIH funding for the phase 2 clinical trial in pediatric patients;
  • $10 million to initiate the planned leasing, build-out and equipping of a new commercial manufacturing facility;
  • $200,000 to pay a success fee to a former lender under a loan agreement that ARGS has previously repaid in full; and
  • the remainder for working capital and other general corporate purposes.

Disclaimer: This ARGS IPO report is based on a reading and analysis of ARGS'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: Argos Therapeutics