On July 1st, Minerva (NASDAQ:NERV) priced its IPO deep in the hole at $6/share, with Jefferies leading the deal along with decent co-managers Baird and JMP. The shares have opened for trading quietly and are changing hands at $6.16.
This is an early/mid-stage biotechnology company which means commercial success is far off, but the areas the company is targeting (schizophrenia, depression, insomnia and Parkinson's disease) are all large, unmet medical needs.
Probably the biggest question here post-IPO is what program(s) will be cut or postponed since only 1/2 the money needed was raised in the IPO. We don't know if the company will do a secondary offering after more results are in hand, or whether a partner might license some rights and enable milestone payments to help offset some of their funding needs.
The limited investor enthusiasm for shares of NERV is partly due to the fact that they have acquired rather than developed some of these compounds, so it's unclear how strong their "R&D engine" is and it's too early to prove if they have a strong commercialization team or not. Generally, biotechnology companies with an acquisition strategy get lower valuations until they can demonstrate an ability to turn those assets into revenue and profits.
A few salient points regarding Minerva's drug positioning:
- Schizophrenia: This is the lead indication for their MIN-101 compound which is entering Phase IIB trials. MIN-101 reduces negative symptoms (emotional disruption, withdrawal, inability to sustain an activity) and helps improve cognitive impairments involving motor speed, verbal fluency, and memory. There are also some positive effects on insomnia, which tends to accompany the schizophrenia. There's certainly opportunity in this market as it's typical for a mix of available drugs to be used in treating this disease. Phase IIB results are expected early in 2016.
- Depression: MIN-117 could be be a big improvement over treatments like Prozac, with a much faster onset for the treatment and fewer negative side effects, especially sexual disfunction. Phase IIB results are due late in 2015.
- Insomnia - Drugs like Ambien increase "sleep drive" while other treatments focus on blocking the "wake drive", but they all have some serious side effects ranging from impaired daytime functioning, interactions with alcohol, abnormal sleep patterns, and are often subject to abuse. It's an early stage drug, but MIN-202 targets the "wake drive" with fewer side effects and efficacy at least equal to drugs like Ambien. Initially, this drug will be looked at to treat insomnia that accompanies depression. MIN-202 will be evaluated (in a Phase IB) as a primary insomnia treatment into the end of 2015.
Minerva also has a glimmer of a possible treatment for Parkinson's disease (MIN-301), but it is so early stage that it's hard to include it in any investment case right now.
With a projected post-IPO share count of 19M, the market capitalization will be just $114M. If any of these drugs actually make it out of the clinical stage, the stock will be worth much more. However, we note that an existing investor like J&J (NYSE:JNJ) isn't putting more money in at this point, so it's hard to have much conviction as an outsider.
Still, this is one name to have on the biotechnology radar screen. Solid results from Phase IIB trials would attract more investors and potential partners. If the shares move up, we'd expect to see a secondary offering to make up for some of the IPO financing shortfall.
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