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Summary

  • ZSPH is a biopharmaceutical firm, focused on the development and commercialization of treatments for hyperkalemia and various other diseases.
  • ZSPH competes with firms with far greater marketing resources; although lead product ZS-9 is close FDA filing, there is no guarantee it will be approved or gain traction.
  • We suggest investors hold off on this IPO.

ZS Pharma, Inc (NASDAQ:ZSPH), a biopharmaceutical firm focused on the development and commercialization of treatments for hyperkalemia and various other diseases, plans to raise $80.0 million in its upcoming IPO.

The Coppell, Texas-based firm will offer 5.0 million shares at an expected price range of $15-$17 per share. If the IPO can reach the midpoint of that range at $16 per share, ZSPH will command a market value of $351 million.

ZSPH filed on May 15, 2014.

Lead Underwriters: Credit Suisse Securities (USA) LLC; J.P. Morgan Securities LLC

Underwriters: BMO Capital Markets Corp; William Blair and Co., L.L.C

Summary: ZSPH Hoping To Take Advantage Market for Treatment of Hyperkalemia

ZSPH is a biopharmaceutical firm seeking to develop and commercialize treatments for renal, liver, metabolic, and cardiovascular diseases.

The firm uses a proprietary technology to create specific ion traps that can lower toxic levels of some electrolytes without unbalancing other electrolytes.

ZSPH's lead product candidate, known as ZS-9, is designed to treat hyperkalemia, a condition involving elevated potassium levels in the blood that can lead to muscle dysfunction and cardiac issues including sudden cardiac death. ZS-9 completed a Phase III study in November 2013 and initiated a second Phase III study in the first quarter of 2014; ZSPH plans to submit a New Drug Application to the FDA and a Marketing Authorization Application in Europe upon completion of the second Phase III study, anticipated in the first half of 2015.

ZSPH hopes to take advantage of the growing market for the treatment of hyperkalemia, which occurs in patients with chronic kidney disease, heart failure, and diabetes. The current standard of care treatment for hyperkalemia is sodium polystyrene sulfonate (SPS), a drug approved over half a century ago that has a reputation for poor patient tolerance.

If ZS-9 is approved, it may offer doctors an alternative to SPS with far better tolerance. The company plans to market ZS-9 through a specialty sales force targeting the relatively small numbers of nephrologists and non-interventional cardiologists that treat hyperkalemia patients.

Valuation

ZSPH offers the following figures in its S-1 balance sheet for the three months ended March 31, 2014:

  • Revenue: $0.00
  • Net Loss: ($10,567,000.00)
  • Total Assets: $30,642,000.00
  • Total Liabilities: $8,974,000.00
  • Stockholders' Equity: ($54,901,000.00)

ZSPH's losses and lack of revenue are typical in a pre-commercial biopharmaceutical firm, and should not be taken as an indicator of the firm's potential for future success. ZSPH will not be able to generate significant revenues or turn a profit until it has commercialized one or more of its product candidates.

Large Pharma Companies Competing In Same Market

If the drug receives approval, ZS-9 will face competition both from providers of SPS and from other firms seeking to develop hyperkalemia treatments.

Relypsa, Inc (NASDAQ:RLYP) is currently in the process of developing a hyperkalemia drug that is also in a Phase III study, and other large pharmaceutical firms may attempt to enter the market as well; ZSPH may have difficulty in competing with established firms with greater access to financial and technical resources.

Management Qualifications

CEO Robert Alexander, Ph.D., has served in his current role since December 2013. He also served as ZSPH's Chairman from March 2013 to March 2014.

He previously served as a Director at Alta Partners and acted as Executive Chairman and interim Chief Executive Officer of SARcode Biosciences. Dr. Alexander also was a Principal in MPM Capital's BioEquities fund and worked in the Business Development group at Genentech, Inc.

He received a B.A. in Zoology from Miami University of Ohio and a Ph.D. in Immunology from the University of North Carolina; he completed his post-doctoral fellowship at Stanford University in the Pathology department.

Conclusion: Investors Should Hold Off On ZSPH

We are neutral on this IPO.

ZSPH is relatively close to filing its New Drug Application for ZS-9 with the FDA, but there's no guarantee that ZS-9 will be approved or that it will gain traction with physicians if it is approved.

While there certainly would be a potential market for ZS-9, given the lackluster treatment options currently available for hyperkalemia patients, ZSPH is hardly the only firm pursuing hyperkalemia treatments, and it may have difficulty in competing with firms with far greater marketing resources.

We suggest investors hold off on this IPO.

Source: ZS Pharma IPO Could Cause (Instead Of Soothe) Investor Pain