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Based in Burlington, MA, Flexion Therapeutics (NASDAQ:FLXN) scheduled a $65 million IPO on the Nasdaq with a market capitalization of $192 million at a price range midpoint of $13 for Wednesday, February 12, 2014.

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SEC Documents
Manager, Joint managers: BMO Capital Markets, Wells Fargo Securities

Co-Managers: Needham & Co., Janney Montgomery Scott

Summary

FLXN is a specialty pharmaceutical company focused on the development and commercialization of novel, long-acting, injectable pain therapies. FLXN is in Phase 2 clinical trials

Pfizer (NYSE:PFE), $202 billion market cap, and Nova A/S (NYSE:NVO), $113 billion market cap, are both shareholders. Current shareholders indicated for $14 million of the IPO.

Valuation

Glossary

Valuation Ratios

Mrkt

Price /

Price /

Price /

Price /

% offered

annualizing Sept 9 mos

Cap (MM)

Sls

Erngs

BkVlue

TanBV

in IPO

Flexion Therapeutics

$191

n/a

-13.3

2.7

2.7

34%

Conclusion

The rating on FLXN is neutral.

FLXN has big shareholders, Pfizer and Nova A/S, with a large addressable market, and is in Phase 2 clinical trials. FLXN is priced at 2.7 times book, with a relatively moderate cash burn rate - the P/E ratio is -13.3, 'moderate' is above -11. A higher absolute number indicates lower cash burn rate.

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

Business

FLXN is a specialty pharmaceutical company focused on the development and commercialization of novel, long-acting, injectable pain therapies.

FLXN is targeting anti-inflammatory and analgesic therapies for the treatment of patients with musculoskeletal conditions, beginning with osteoarthritis, a type of degenerative arthritis, referred to as OA. FLXN's broad and diversified portfolio of product candidates addresses the OA pain treatment spectrum, from moderate to severe pain, and provides FLXN with multiple unique opportunities to achieve its goal of commercializing novel, patient-focused pain therapies.

Pipeline

FLXN's pipeline consists of three proprietary product candidates: FX006, a sustained-release, intra-articular steroid; FX007, a TrkA receptor antagonist for post-operative pain; and FX005, a sustained-release intra-articular p38 MAP kinase inhibitor. FLXN retains the exclusive worldwide rights to its product candidates.

FX006
FLXN's lead product candidate, FX006, is a first-in-class injectable intra-articular, meaning "in the joint," sustained-release treatment for patients with moderate to severe OA pain. FX006 combines a commonly administered steroid, triamcinolone acetonide, with poly lactic-co-glycolic acid to provide sustained therapeutic concentrations in the joint and persistent analgesic effect.

In a completed Phase 2b dose-ranging clinical trial, FX006 has demonstrated clinically meaningful and significantly better pain relief compared to the current injectable standard of care.

Before pursuing Phase 3 clinical development, FLXN expects to initiate a confirmatory Phase 2b clinical trial in the second quarter of 2014 to further identify a safe and well-tolerated dose of FX006 that demonstrates superior pain relief to placebo.

FLXN is also currently conducting a synovial fluid pharmacokinetic clinical trial to measure the duration that FX006 remains in the joint, which will inform us on the dosing regimen for a planned repeat dose safety clinical trial to assess when repeat dosing of FX006 can be safely administered.

Two additional product candidates
FLXN is developing two additional product candidates, FX007 for post-operative pain and FX005 to treat end-stage OA patients.

FX007 is a locally administered TrkA receptor antagonist for persistent relief of post-operative pain, including in patients who have received total joint replacement, also referred to as total joint arthroplasty, or TJA.

FLXN plans to file an Investigational New Drug application for FX007 in the first half of 2014. FX005 is an intra-articular, sustained-release p38 MAP kinase inhibitor which has both analgesic and anti-inflammatory effects, and has successfully completed a placebo-controlled Phase 2a proof of concept clinical trial demonstrating significant pain relief in OA patients.

Commercialization rights
FLXN has worldwide commercialization rights to all of its product candidates.

FLXN intends to market products in the United States through its own sales force that will target specialty physicians, including orthopedists and rheumatologists.

Outside of the United States, FLXN is exploring selective partnerships with third parties for the development and commercialization of our product candidates.

History

FLXN was incorporated in Delaware in November 2007, and to date it has devoted substantially all of its resources to its development efforts relating to its product candidates, including conducting clinical trials with its product candidates, providing general and administrative support for these operations and protecting its intellectual property.

FLXN is a development stage company and do not have any products approved for sale and have not generated any revenue from product sales.

Funding
From its inception through September 30, 2013, FLXN has funded its operations primarily through the sale of its convertible preferred stock and, to a lesser extent, debt financing. From its inception through September, 30, 2013, FLXN has raised $80 million from such transactions.

Intellectual property

As of December 31, 2013, FLXN exclusively licenses one U.S. patent, one U.S. patent application and their foreign counterparts directed to FX007 and one U.S. patent, one U.S. patent application and their foreign counterparts directed to FX005. In addition, FLXN owns one pending U.S. non-provisional patent application and counterpart foreign patent application, along with one pending U.S. provisional patent application, all directed to its FX006 product candidate.

There is one issued U.S. patent covering the TrkA antagonist compound, FX007, which is owned by AstraZeneca and to which FLXN has an exclusive license. This patent is scheduled to expire in 2028. FLXN has also licensed counterpart foreign patents that have granted in 48 countries, which include Australia, Canada, and multiple European countries. These patents in Australia, Canada and multiple European countries are scheduled to expire in 2026. FLXN has licensed counterpart patent applications that are pending in Brazil, Chile, Ecuador, Egypt, India, South Korea, Malaysia, Norway, Pakistan, Uruguay, Venezuela, Argentina, Indonesia, and Thailand.

Competition

FLXN's industry is highly competitive and subject to rapid and significant technological change. The large size and expanding scope of the pain market makes it an attractive therapeutic area for biopharmaceutical businesses.

FLXN's potential competitors include pharmaceutical, biotechnology and specialty pharmaceutical companies. Several of these companies have robust drug pipelines, readily available capital, and established research and development organizations.

5% stockholders

Versant Venture Capital III, L.P. and its affiliates 29.75%

Sofinnova Capital VI FCPR 19.24%

Pfizer Inc. 17.31%

5AM Ventures II, L.P. and its affiliates 15.51%

Novo A/S 11.19%

Michael D. Clayman, M.D.7.68%

Neil Bodick, M.D., Ph.D. 5.43%

Use of proceeds

FLXN expects to net $58.3 million from its IPO. Proceeds are allocated as follows:

$25.1 million to fund the continued clinical development of FX006, including FLXN's planned confirmatory Phase 2b clinical trial, as well as initiation of a planned repeat dose safety clinical trial and Phase 3 development;

$11 million to fund the continued development of FX007, including a planned proof of concept clinical trial; and

the remainder for working capital and other general corporate purposes.

Disclaimer: This FLXN IPO report is based on a reading and analysis of FLXN'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: Flexion Therapeutics