Investors Should Avoid Parnell Pharmaceuticals IPO

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 |  About: Parnell Pharmaceuticals Holdings Ltd (PARN)
by: Don Dion

Summary

Australia-based PARN is a pharmaceutical firm, seeking to develop, manufacture and commercialize animal health products.

Although PARN has products marketed in fourteen countries, the firm is losing money and faces strong competition from larger firms.

We recommend investors avoid this IPO.

Parnell Pharmaceuticals Holdings Ltd (NASDAQ:PARN), a pharmaceutical firm that seeks to develop, manufacture and commercialize animal health products, plans to raise $64.8 million in its upcoming IPO.

The Alexandria, Australia-based firm will offer 3.6 million shares, including 10% insider shares, at an expected price range of $17-$19 per share. If the IPO can hit the midpoint of that range at $18 per share, PARN will command a market value of $207 million.

Filing Date, Underwriters

PARN filed on May 19, 2014.

Lead Underwriters: Jefferies LLC; Piper Jaffray & Co.

Underwriters: Geller Biopharm; JMP Securities LLC; Ladenburg Thalmann and Co. Inc

PARN Products Used in 14 Countries

PARN is pharmaceutical firm engaged in the development, manufacturing and commercialization of animal health products.

The firm's five current products are marketed in fourteen countries. PARN's pair of proprietary software platforms are also designed to enhance animals' performance and quality of life, while improving efficiency and profitability for PARN's customers.

The firm continues to focus on developing new products, having conducted over 31 clinical trials over the course of the past ten years with plans to conduct at least 25 more trials over the next four years. PARN plans to bring at least seven new products to market in the next five years.

PARN's current products include health solutions for both production animals and companion animals. The firm's estroPLAN and GONAbreed hormone products are intended to improve cattle breeding performance, while Zydax treats osteoarthritis in dogs and horses.

Valuation

PARN offers the following figures in its F-1 balance sheet for the nine months ended March 31, 2014:

  • Revenues: $4,044,000.00
  • Total Comprehensive Loss: ($6,584,000.00)
  • Total Assets: $33,753,000.00
  • Total Equity: ($2,159,000.00)

Competition From Numerous Large Animal Health Firms

PARN competes with numerous large animal health firms, some of which may have access to greater financial and technical resources than PARN.

Some of these competitors offer directly competing product lines, while others may perform research to create competing products.

Major competitors include Zoetis, Inc. (NYSE:ZTS), Merck & Co., Inc (NYSE:MRK), Sanofi S.A. (NYSE:SNY), Eli Lilly and Company (NYSE:LLY), Bayer AG (OTCPK:BAYRY), Novartis AG (NYSE:NVS), Ceva Animal Health (NASDAQ:CEVA), and Boehringer Ingelheim Animal Health.

Management Highlights

President and CEO Robert Joseph has served in his current positions and as a Director since 2006.

Mr. Joseph previously served as Senior Brand Manager-Diabetes and a Company Marketing Strategy Manager with Eli Lilly. He also worked as a Financial Planning Manager with Allergan, Inc. and as a Business Performance Manager with Herron Pharmaceuticals Pty Ltd.

Mr. Joseph holds degrees in science (pre-medicine), finance (accounting and commercial law) and marketing from the University of Queensland in Australia, and is a Certified Public Accountant in Australia.

Conclusion: Investors Should Avoid PARN

We plan to avoid this IPO. We hear the underwriters may need to lower the price to get this puppy launched.

Though PARN already has numerous products already available in multiple markets, the firm is losing money, and there's little evidence that further product development will reverse the company's fortunes.

In any case, the firm's plans to release further products are far from guaranteed, as PARN will have to satisfy the regulatory bodies of various countries in order to bring their products to market.

PARN's IPO underwriting is less than impressive, and competition is fierce.

We see little reason to bet on this firm.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.