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Summary

  • Pre-clinical-stage biotechnology company.
  • Shareholders indicated an interest in buying $10 million on the IPO.
  • Price-to-book is 2.4, relatively low and the cash burn rate is relatively low.

Based in Alachua, FL, Applied Genetic Technologies (NASDAQ:AGTC) scheduled a $50 million IPO on the Nasdaq with a market capitalization of $179 million at a price range midpoint of $14 for Thursday, March 27, 2014.

The full IPO calendar is available at IPOpremium.

SEC Documents
Manager, Joint managers: BMO Capital Markets and Wedbush PacGrow
Co-Managers: Cantor Fitzgerald, Roth Capital

End of lockup (180 days): Tuesday, September 23, 2014

End of 25-day quiet period: Monday, April 21, 2014

Summary
AGTC is a pre-clinical-stage biotechnology company that uses its proprietary gene therapy platform to develop products for patients with severe inherited orphan diseases in ophthalmology.

Shareholders have indicated an interest in purchasing up to $10 million on the IPO.

Valuation
Glossary

Valuation Ratios

Mrkt

Price /

Price /

Price /

Price /

% offered

Annualizing Dec 6 mos

Cap (MM)

Sls

Erngs

BkVlue

TanBV

in IPO

Applied Genetic Technologies

$179

128.0

-18.3

2.39

2.44

28%

Conclusion
AGTC has no products currently in clinical trials. Shareholders indicated an interest in buying $10 million on the IPO.

The price-to-book is 2.4, relatively low and the cash burn rate is relatively low, with a price-to-earnings ratio of -18 (lower absolute number means higher cash burn rate).

The rating on AGTC is positive, based on the above metrics and because biopharma IPOs recently have done well, even though AGTC clinical trials aren't scheduled to start until late 2014.

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

Business
AGTC is a pre-clinical-stage biotechnology company that uses its proprietary gene therapy platform to develop products designed to transform the lives of patients with severe inherited orphan diseases in ophthalmology.

AGTC's lead product candidates, which are each in the preclinical stage, are treatments for X-linked retinoschisis, or XLRS, achromatopsia, or ACHM, and X-linked retinitis pigmentosa, or XLRP.

These rare diseases of the eye are caused by mutations in single genes, significantly affect visual function and currently lack effective medical treatments.

Clinical trial status
For its XLRS product candidate, AGTC expects to file an IND and initiate Phase 1/2 clinical trials in the United States in late 2014 with initial clinical data expected in mid-2015.

For its ACHM product candidate, AGTC expects to file an IND and initiate Phase 1/2 clinical trials in the United States in early 2015, with clinical data expected in late 2015.

AGTC has also begun preclinical studies for its product candidate addressing XLRP, a disease characterized by progressive degeneration of the retina, leading to total blindness in adult men.

In the longer term, AGTC will seek opportunities to take advantage of the adaptability of its gene therapy platform to address a range of genetic diseases, both within and beyond its initial focus area of orphan ophthalmology.

Gene therapy platform
AGTC initially developed its gene therapy platform in clinical-stage proof-of-concept programs involving three other diseases:

Leber congenital amaurosis (type 2), or LCA2, an orphan eye disease caused by mutation in the RPE65 gene;

The wet form of age-related macular degeneration, or wet AMD, an eye disease affecting a large patient population; and

Alpha-1 antitrypsin deficiency, or AAT deficiency, an inherited orphan lung disease.

History
Since its inception in 1999, AGTC has devoted substantially all of its resources to its development efforts relating to its proof-of-concept programs in ophthalmology and alpha-1 antitrypsin deficiency, or AAT deficiency, an inherited orphan lung disease, including activities to manufacture product in compliance with good manufacturing practices, preparing to conduct and conducting clinical trials of its product candidates, providing general and administrative support for these operations and protecting its intellectual property.

AGTC does not have any products approved for sale and have not generated any revenue from product sales.

AGTC has funded its operations primarily through the private placement of preferred stock, common stock, convertible notes and warrants to purchase preferred stock.

Grant funding
AGTC has also been awarded grant funding aggregating $10.6 million between its inception and December 31, 2013, either independently or with its collaborators.

Most recently, in May 2013, AGTC and the University of Florida, or UF, were jointly awarded an $8.3 million grant from the National Eye Institute, or NEI, of the National Institutes of Health, or NIH, to support development of AGTC's ACHM product candidate.

As a sub-awardee, as of December 31, 2013, AGTC had received $0.2 million and it expected to receive an additional $3.7 million over four years under this grant.

Dividend Policy
No dividends are planned.

Intellectual Property
AGTC holds or has licensed 79 issued and 28 pending patents covering its manufacturing technology. AGTC believes that its core competency and intellectual property estate in vector manufacturing differentiate it competitively and provide a key element of its gene therapy platform.

Competition
While AGTC believes that its proprietary technology estate and scientific expertise in the gene therapy field provides it with competitive advantages, AGTC faces potential competition from many different sources, including larger and better-funded pharmaceutical, specialty pharmaceutical and biotechnology companies, as well as from academic institutions and governmental agencies and public and private research institutions that may develop potentially competitive products or technologies.

Currently there are no approved products for any of AGTC's lead orphan ophthalmology indications of XLRS, ACHM and XLRP.

AGTC believes the key competitive factors that will affect the success of its product candidates, if approved, are likely to be their efficacy, safety, convenience of administration and delivery, price, the level of generic competition and the availability of reimbursement from government and other third-party payors.

5% stockholders
Alta Partners VIII, L.P. 30.7%
S.R. One, Limited 20.4%
Entities affiliated with InterWest Partners 15.1%
MedImmune Ventures, Inc. 15.1%
Intersouth Partners VI, L.P. 12.5%
Osage University Partners I, L.P. 5.1%

Use of proceeds
AGTC expects to net $44.8 million from its IPO. Proceeds are allocated as follows:

$10.6 million to fund a Phase 1/2 clinical trial and, if that is successful, to initiate a pivotal Phase 3 trial of its XLRS product candidate;

$17.9 million to fund a Phase 1/2 clinical trial and, if that is successful, to initiate a pivotal Phase 3 trial of its ACHM product candidate;

$5 million to fund additional preclinical studies of its XLRP product candidate;

$2.3 million to explore, through early preclinical studies, potential applications of its gene therapy platform in other indications in orphan ophthalmology; and

the remainder for working capital and other general corporate purposes.

Disclaimer: This AGCT IPO report is based on a reading and analysis of AGCT'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: Applied Genetic Technologies