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Summary

  • Clinical stage specialty pharmaceutical company.
  • No collaboration partners.
  • Lead candidate has only completed Phase 1b clinical trials.

Based in Malvern, PA, Recro Pharma (NASDAQ:REPH) scheduled a $28 million IPO on the Nasdaq with a market capitalization of $59.2 million at a price range midpoint of $11 for Friday, March 7, 2014.

The full IPO calendar is available at IPOpremium.

Manager, Joint managers: Aegis Capital

Co-Managers: Brean Capital

Summary
REPH is a clinical stage specialty pharmaceutical company developing non-opioid therapeutics for the treatment of pain, initially in the post-operative setting.

Valuation

Valuation Ratios

Mrkt

Price /

Price /

Price /

Price /

% offered

 

Cap (NYSE:MM)

Sls

Erngs

BkVlue

TanBV

in IPO

Recro Pharma

$59

n/a

-24.8

2.4

2.4

49%

      

Glossary

Conclusion

REPH has no collaboration partners, shareholders aren't indicating buying on the IPO, intellectual property is from licenses rather than internal development and the lead candidate has only completed Phase 1b clinical trials (very early stage).

The rating on REPH is avoid.

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

Business
REPH is a clinical stage specialty pharmaceutical company developing non-opioid therapeutics for the treatment of pain, initially in the post-operative setting.

REPH has studied various dosage forms of Dex in eight completed clinical trials, including two placebo controlled trials that demonstrated effective pain relief.

Dex, which is in a class of drugs called alpha-2 adrenergic agonists, is an FDA approved and commercial injectable drug sold by Hospira in the United States under the brand name Precedex® and by Orion in Europe under the brand name Dexdor®.

As Dex is not an opioid based drug, REPH expects to overcome many of the side effects associated with commonly prescribed opioid based therapeutics, including addiction, constipation and respiratory distress while maintaining analgesic, or pain relieving, effect.

If REPH is successful in obtaining approval of Dex-IN, its proprietary intranasal formulation of Dex, for post-operative pain, REPH may elect to pursue additional approvals for cancer breakthrough pain and/or non-cancer breakthrough pain.

Upon regulatory approval, REPH's license with Orion and its ownership rights with respect to dosage forms for its product candidates will provide REPH worldwide commercial rights related to Dex, except in Europe, Turkey and the CIS for use in the treatment of pain in humans in multiple dosage forms.

REPH is a development stage company with a limited operating history.

History
It has funded its operations to date primarily from the private placement of convertible preferred stock and proceeds received from its convertible notes private placements.

From inception through December 31, 2013, REPH has received net proceeds of $4 million from the sale of convertible preferred stock and $9.4 million from the sale of its convertible notes in private placements.

Competition

The pharmaceutical and biotechnology industries are intensely competitive and subject to rapid and significant technological change. REPH current and future competitors include pharmaceutical, biotechnology and specialty pharmaceutical companies.

Many of REPH's competitors have greater financial and other resources than REPH has, such as more commercial resources, larger research and development staffs and more extensive marketing and manufacturing organizations. As a result, these companies may obtain marketing approval more rapidly than REPH is able and may be more effective in selling and marketing their products. Smaller or early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies.

REPH's competitors may succeed in developing, acquiring or licensing technologies and drug products that are more effective or less costly than its product candidates or any other products that REPH may develop which could render its products obsolete and noncompetitive.

REPH expects any products that it develops and commercializes to compete on the basis of, among other things, efficacy, safety, convenience of administration and delivery, price and the availability of reimbursement from government and other third-party payers. REPH also expects to face competition in its efforts to identify appropriate collaborators or partners to help commercialize its product candidates in our target commercial markets.

In cancer breakthrough pain relief, REPH expects to compete against established companies, including Teva Pharmaceutical Industries, Ltd., Meda AB, Kyowa Hakko, Insys Therapeutics, Inc. and Archimedes Pharma Ltd.

All of these potential competitors have various formulations of fentanyl, a fast-acting opioid. REPH is not aware of any non-fentanyl related therapeutics in development for the treatment of cancer breakthrough pain.

5% stockholders

SCP Vitalife Partners II, L.P. 58.8%

SCP Vitalife Partners (Israel) II, L.P. 19.7%

Churchill Trust 5.2%

Thomas F. Henwood 15.9%

Use of proceeds

REPH expects to net $24.5 million from its IPO. Proceeds are allocated as follows:

$2.1 million for its planned Dex-IN post-operative pain Phase IIb trial following orthopedic surgery, specifically bunionectomy surgery;

$8 million for two Dex-IN post-operative pain Phase III pivotal trials, one following intra-abdominal surgery and one following orthopedic surgery;

$1.5 million for preclinical animal toxicology studies;

$5 million for human safety clinical trials and manufacturing work for Dex-IN, including the preparation of registration and stability batches and packaging of clinical materials; and

the remainder to fund working capital needs and other general corporate purposes.

Disclaimer: This AQXP IPO report is based on a reading and analysis of REPH's S-1 filing, which can be found here, and a separate, independent analysis by IPOpremium.com. There are no unattributed direct quotes in this article.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Source: IPO Preview: Recro Pharma