Adamas Pharmaceuticals IPO Could Ease Investors' Nerves

by: Don Dion


ADMS is a pharmaceutical firm focused on the development of therapeutics for chronic disorders of the central nervous system.

With lead underwriters Credit Suisse and Piper Jaffray, ADMS plans to raise $51.0 million in its upcoming IPO, with a target price of $16-$18 per share.

We rate ADMS IPO a buy due to the company’s strong partnership with Forest Laboratories, consistent revenues, and late-stage product candidates.

Adamas Pharmaceuticals Inc (NASDAQ:ADMS), a pharmaceutical firm focused on the development of therapeutics for chronic disorders of the central nervous system, plans to raise $51.0 million in its upcoming IPO.

The Emeryville, California-based firm will offer 3.0 million shares at an expected price range of $16-$18 per share. If the IPO can find the midpoint of that range at $17 per share, ADMS will command a market value of $352 million.

ADMS filed on March 5, 2014.
Lead Underwriters: Credit Suisse Securities LLC, Piper Jaffray & Co
Underwriters: Needham & Company LLC, William Blair and Co LLC

Overview of ADMS
ADMS is a specialty pharmaceutical firm, focused on creating novel therapeutics for patients with chronic disorders of the central nervous system (CNS). The firm's development approach consists of improving on the pharmokinetic profiles of pre-existing, approved drugs in order to produce novel therapeutics.

The firm's lead wholly owned product candidate, ADS-5102, is being developed to treat both levodopa induced dyskinesia (LID), a complication of Parkinson's disease, and chronic behavioral symptoms that are associated with traumatic brain injuries. The firm plans to initiate a Phase 3 registration trial for ADS-5102 during this year. The firm has also partnered with Forest Laboratories Inc to develop MDX-8704, a fixed-dose combination product candidate for the treatment of Alzheimer's-related dementia. Forest currently markets Namenda XR, a controlled-release product for dementia, under a license from ADMS.

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ADMS plans to develop an in-house sales force to distribute its wholly-owned products in the event of their approval.

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

Revenue: $71,095,000.00
Net Income: $50,921,000.00
Total Assets: $86,216,000.00
Total Liabilities: $10,462,000.00
Stockholders' Equity: $56,605,000.00

Fierce Competition
ADMS faces fierce competition in developing and commercializing its novel pharmaceuticals from firms that market extant CNS therapeutics and from firms developing new potential treatments. Many of the firms that ADMS may compete against have significantly greater financial and technical capacities than ADMS. Major competitors include the likes of Novartis AG (NYSE:NVS), Eisai Inc, Teva Pharmaceutical Industries (NASDAQ:TEVA), GlaxoSmithKline pls (NYSE:GSK), and Boehringer Ingelheim.

Brainy Management
Co-founder Gregory Went, Ph.D has served as the CEO and Chairman of ADMS since the firm's 2000 inception. He previously co-founded and served as the Executive Vice President of CuraGen Corporation. Dr. Went has served as a Director of Angelica Therapeutics Inc since 2006. He received a Ph.D. in Chemical Engineering from the University of California, Berkeley and a B.S. in Chemical Engineering from Carnegie Mellon University.

Conclusion - A Buy For Investors
We rate this IPO a buy in the proposed range.

Although possessing a smaller group of underwriters, ADMS' backing is strong. The company has already been able to generate revenue through its successful partnership with Forest Laboratories, and though the firm may not be able to maintain the same levels of revenue through that partnership, it at least has avoided the crippling debt that besets many early-stage pharmaceutical firms.

The firm's lead product candidate is in the latter stages of clinical trials, and while there's certainly no guarantee of FDA approval, ADMS has at least demonstrated the efficacy and safety of its drug in the trials that have occurred thus far.

ADMS's approach to development, which is focused on the enhancement of previously approved drug, may also afford it a clearer path to approval for future product candidates.

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 (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.