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Summary

  • Recro Pharma Inc., a clinical stage pharmaceutical firm, developing non-opioid pain therapeutics, plans to raise $28 million in its upcoming IPO (2.5 million shares, $10-$12 per share).
  • REPH is a clinical-stage pharmaceutical company, engaged in the development of non-opioid pain relief therapeutics; lead product is an intranasal formulation of dexmedetomidine (Dex, for short).
  • REPH will face an uphill battle against the pharmaceutical giants, including Johnson & Johnson, which already produces these options.

Recro Pharma Inc. (NASDAQ:REPH), a clinical stage pharmaceutical firm, developing non-opioid pain therapeutics, plans to raise $28 million in its upcoming IPO this week.

The Malvern, Pennsylvania-based firm will offer 2.5 million shares at an expected price range of $10-$12 per share. If the IPO can reach the midpoint of that range at $11 per share, REPH will command a market value of $61 million.

REPH filed on October 24, 2013.
Lead Underwriter: Aegis Capital Corp.
Underwriter: Brean Capital LLC

Summary

REPH is a clinical-stage pharmaceutical company, engaged in the development of non-opioid pain relief therapeutics. The firm is currently focused on post-operative therapeutics. REPH's lead product is an intranasal formulation of Dexmedetomidine (Dex, for short); the firm has completed eight clinical studies of various dosages of Dex, including a pair of placebo-controlled trials that resulted in evidence of effective pain relief. REPH is preparing for a Phase IIb trial of Dex in patients with post-operative pain; the firm plans to use the proceeds of this IPO to fund the IIb trial as well as several other clinical trials necessary to push the drug towards FDA approval. The company's pipeline is shown below.

(click to enlarge)

(Source: Recro Pharma)

Valuation

REPH offers the following figures in its S-1 balance sheet for the year ending December 31, 2013:

Revenue: $0.00
Net Loss: ($1,957,818.00)
Total Assets: $851,112.00
Total Liabilities: $12,930,974.00
Stockholders' Equity: ($17,959,899.00)

REPH's current lack of revenue is typical of a clinical-stage pharmaceutical firm, and should not be considered a conclusive factor in determining the company's potential for future success. The firm will not be able to turn a profit until one or more of its product candidates have been commercialized.

Business

If approved, Dex will be forced to compete with existing post-operative pain therapeutics, including the popular opioid painkillers that it seeks to replace. Many of the firms currently producing pain therapeutics are established pharmaceutical firms with technical and financial capabilities far exceeding those of REPH. These competitors include Johnson & Johnson (NYSE:JNJ), Cadence Pharmaceuticals (CADX), Purdue Pharma, Endo Pharmaceuticals (NASDAQ:ENDP), and Pacira Pharmaceuticals (NASDAQ:PCRX). Several other firms are in the process of developing post-operative pain therapeutics that could compete with Dex in the future, including Adynxx Inc., AcelRx Pharmaceuticals (NASDAQ:ACRX), and Cara Therapeutics (NASDAQ:CARA).

Management

President and CEO Gerri Henwood has served in her current positions since REPH's 2008 inception. She previously served as the President of MCG, the President and CEO of Auxilium Pharmaceuticals Inc., and the founder and CEO of IBAH Inc., Ms. Henwood serves on the board of directors of Alkermes plc (NASDAQ:ALKS). She holds a B.S. in Biology from Neumann University.

Conclusion

We rate this IPO as neutral to negative and we don't plan on participating.

Though there is certainly demand for an alternative pain therapeutic to the current opioid options, REPH's lead product candidate is still a very long way from gaining FDA approval, and there's no guarantee that Dex will ever be approved or gain commercial traction if it is approved.

The medical community is notoriously resistant to adopting new treatments where effective options already exist, and REPH will face an uphill battle against the pharmaceutical giants that produce those options. REPH's success is entirely dependent on the success of Dex, making this a very risky buy so early in the development process.

Source: Recro Pharma IPO Could Be More Painful Than Expected