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Summary

  • Committed to the discovery, development and commercialization of novel anti-infectives.
  • Target market is approximately $3.6 billion.
  • Progression to Phase 2 studies.

Based in Durham, NC, Scynexis (NASDAQ:SCYX) scheduled a $55 million IPO on the Nasdaq with a market capitalization of $204 million at a price range midpoint of $13 for Thursday, April 3, 2014. Update: shares increased to 7.3 million from 4.2 milliion, price range reduced to a $7-8 range, amount to be raised remains unchanged, rating unchanged.

The full IPO calendar is available at IPOpremium.

SEC Documents
Manager, Joint managers: RBC Capital Markets, Canaccord Genuity
Co-Managers: JMP Securities

End of lockup (180 days): Tuesday, September 30, 2014

End of 25-day quiet period: Monday, April 28, 2014

Summary
SCYX is a pharmaceutical company committed to the discovery, development and commercialization of novel anti-infectives to address significant unmet therapeutic needs.

Valuation
Glossary

Valuation Ratios

Mrkt

Price /

Price /

Price /

Price /

% offered

 

Cap (MM)

Sls

Erngs

BkVlue

TanBV

in IPO

SCYNEXIS

$204

12.1

-6.8

5.2

5.9

27%

       

Conclusion
The rating on SCYX is neutral to positive.

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

Business
SCYX is a pharmaceutical company committed to the discovery, development and commercialization of novel anti-infectives to address significant unmet therapeutic needs.

SCYX is developing its lead product candidate, SCY-078, as a novel oral and intravenous (IV) drug for the treatment of serious and life-threatening invasive fungal infections in humans. SCY-078 has been shown to be effective in vitro and in vivo in animal studies against a broad range of Candida and Aspergillus fungal species, including drug resistant strains.

These important pathogens account for 85% of invasive fungal infections in the United States and Europe.

Market
SCYX estimates that the annual worldwide market for systemic anti-fungal therapeutics, where SCYX will target SCY-078, is approximately $3.6 billion.

Each year there are estimated to be over 600,000 confirmed cases of invasive fungal infections caused by various species of Candida and Aspergillus, two of the most serious fungal pathogens in the United States and Europe.

Licensing & collaboration agreements
SCYX has signed a number of licensing and collaboration agreements with partners in human and animal health, including

(1) Merck, a pharmaceutical company, under which SCYX exclusively licensed from Merck its rights to SCY-078 in the field of human health, and agreed to pay Merck milestones upon the occurrence of specified events and will pay tiered royalties based on worldwide sales of SCY-078 when and if it is approved (in 2014, Merck assigned the patents to SCYX related to SCY-078 that it had exclusively licensed to us and, as contemplated by the agreement, SCYX will continue to pay milestones and royalties);

(2) Merial, a wholly owned subsidiary of Sanofi, under which SCYX provides animal health research services on a fee for service basis and, with respect to certain product candidates, potential milestones and royalties;

(3) R-Pharm, CJSC, a leading supplier of hospital drugs in Russia, granting them exclusive rights in the field of human health to develop and commercialize SCY-078 in Russia and several smaller non-core markets, under which we are entitled to receive potential milestones and royalties; and

(4) Dechra Ltd., a UK listed international veterinary pharmaceutical business, granting Dechra rights to SCY-641 in the field of animal health, including dog dry eye, under which SCYX are entitled to receive potential milestones and royalties.

New class of drugs
SCY-078 represents a new chemical class of drugs designed to block an established target in infectious fungi.

SCYX has conducted studies of SCY-078 using animal models that were used in the development of previously approved anti-fungal drugs where these models were proven to be predictive of efficacy in humans.

Using these well-established animal models, SCY-078 was shown to be highly active against Candida and Aspergillus.

SCY-078 has shown potent in vitro activity against a large collection of medically relevant strains of Candida and Aspergillus, including multi-drug resistant strains that have been isolated from infected patients.

Clinical trials
SCY-078 was shown to be sufficiently safe and well-tolerated in multiple Phase 1 studies to support progression to Phase 2 studies.

SCYX anticipates that the first patient will be enrolled in the second half of 2014 in a Phase 2 study with an oral formulation of SCY-078 for the treatment of invasive Candida infection, a common and often fatal invasive fungal infection, and anticipate beginning studies with an IV formulation of SCY-078 in 2015.

In addition to pursuing the development of SCY-078, SCYX is planning to use its platform of enfumafungin derivatives and expertise to expand its anti-fungal portfolio.

SCYX also has clinical and preclinical programs based on the use of cyclophilin inhibitors to treat viral diseases, and provide contract research and development services, primarily in the field of animal health, which currently generate substantially all of its revenue.

History
As a spinout from Aventis in 2000, SCYX began as a chemistry and animal health services company, providing contract research services to third parties

Through the provision of these contract research and development services, SCYX built significant expertise in parasitic infections and drug discovery.

Since its formation, SCYX has expanded its animal health capabilities and have discovered a number of proprietary compounds.

In June 2004, SCYX entered into an exclusive animal health research collaboration with Merial which included significant milestone and royalty payments.

SCYX entered into a revised agreement with Merial effective January 2012 that was non-exclusive, resulting in the ability to provide contract research and development services in the field of animal health for other third parties, but which reduced the amount of research business SCYX receive from Merial.

However, SCYX maintains rights to milestones and royalties for products in development under the prior agreement.

Dividend Policy
No dividends are planned.

Intellectual Property
As of February 23, 2014, SCYX is the owner of 14 issued U.S. patents and 154 issued non-U.S. patents with claims to novel compounds, compositions containing them, processes for their preparation, their uses as pharmaceutical agents and test methods, with terms expiring between 2016 and 2030.

Of these patents, one U.S. patent relates to SCY-078. SCYX is actively pursuing ten U.S. patent applications (provisional and non-provisional), one international (PCT) patent application and 86 non-U.S. patent applications in at least 35 jurisdictions.

SCYX is the exclusive licensee from Aventis Pharma of three issued U.S. patents and 63 issued non-U.S. patents, with claims to novel compounds, compositions containing them, processes for their preparation, and their uses as pharmaceutical agents, with terms expiring between 2017 and 2022. These include patents covering SCYX's clinical candidate SCY-635.

Competition
SCYX's competitors include large pharmaceutical and biotechnology companies, and specialty pharmaceutical and generic drug companies.

The three leading branded anti-fungal drugs represent one from each main class; V-fend® (voriconazole), an azole marketed by Pfizer ($754 million in 2012); Cancidas® (caspofungin), an echinocandin marketed by Merck ($619 million in 2012); and AmBisome® (liposomal amphotericerin B), a polyene sold by Gilead in Europe, by Astellas in the United States and by Dainippon-Sumitomo in Japan ($450 million in 2012).

Pfizer also markets the echinocandin Eraxis® (anidulafungin), Merck also markets the azole Noxafil® (posaconazole), and Astellas also markets the echinocandin Mycamine® (micafungin).

5% stockholders
Alta BioPharma Partners II, LP and affiliate 18.21%
Burrill Biotechnology Capital Fund, L.P. 9.62%
F.C.P.R. Genavent 11.16%
FCPR Biotechnology Fund 11.88%
Merial Limited 6.33%
S.R. One, Limited 9.41%
Ventech Capital II 18.41%
Jean-Yves Nothias, Ph.D. 11.88%

Use of proceeds
SCYX expects to net $48 million from its IPO. Proceeds are allocated as follows:

$30 million for clinical and preclinical costs associated with the completion of Phase 2 and the initiation of Phase 3 trials for its lead product candidate SCY-078;

$15 million to pay down its credit facility agreement with HSBC Bank USA, National Association as it becomes due; this credit facility has an interest rate of LIBOR plus 0.95% per annum. SCYX is required to pay $7.5 million on or before June 30, 2014 and any remaining amount on or before December 31, 2014; and

the balance to fund working capital, capital expenditures and other general corporate purposes.

Disclaimer: This SCYX IPO report is based on a reading and analysis of SCYX'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: Scynexis