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Summary

  • PFNX was a December 2009 spinout from The Dow Chemical Company.
  • Pre-IPO shareholders include affiliates of The Dow Chemical Company with 49% and Signet Healthcare Partners with 35%.
  • PFNX is targeting large markets, but the potential competitive advantage is unclear.

Based in San Diego, CA, Pfenex (Pending:PFNX) scheduled a $65 million IPO on the NYSE with a market capitalization of $198 million at a price range midpoint of $13 for Friday, July18, 2014. The expected price was recently set at $8.

The full IPO calendar is available at IPOpremium

SEC Documents

Manager, Co-Managers: William Blair, JMP Securities

Joint Managers: Mizuho Securities

End of lockup (180 days): Wednesday, January 14, 2015

End of 25-day quiet period: Tuesday, August 12, 2014

Summary

PFNX was a December 2009 spinout from The Dow Chemical Company. Pre-IPO shareholders include affiliates of The Dow Chemical Company with 49% and Signet Healthcare Partners with 35%.

PFNX is a clinical-stage biotechnology company engaged in the development of difficult to manufacture and high-value proteins, initially focused on biosimilar therapeutics, or biosimilars.

PFNX is targeting large markets, but the potential competitive advantage is unclear.

Valuation

Glossary

Valuation Ratios

Mrkt Cap (MM)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

Pfenex

$198

6.7

-20.6

2.6

3.1

33%

Conclusion

The rating on PFNX is neutral plus.

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

Business

PFNX is a clinical-stage biotechnology company engaged in the development of difficult to manufacture and high-value proteins, initially focused on biosimilar therapeutics, or biosimilars.

PFNX's lead product candidate is PF582, a biosimilar candidate to Lucentis (ranibizumab). Lucentis, marketed by F. Hoffmann-La Roche Ltd. and Novartis AG, for the treatment of patients with retinal diseases, achieved approximately $4.3 billion in global product sales in 2013.

For PF582, PFNX is currently conducting a Phase 1b/2a trial in patients with wet age-related macular degeneration, or wet AMD, with results expected in the fourth quarter of 2014.

PFNX expects to commence a Phase 3 trial in mid-2015, with results expected in 2017. PFNX intends to commercialize PF582 with its own internal sales and marketing capabilities in North America and Europe.

Lead Product Candidate: PF582 - Ranibizumab

With the safety and efficacy of Lucentis already established by the innovator companies, a key hurdle in the development of PF582, or any biosimilar candidate, is establishing bioanalytical similarity of the product candidate to the reference product pursuant to applicable regulations.

PFNX has completed extensive bioanalytical similarity studies comparing PF582 to multiple lots of United States and European Union sourced Lucentis as well as comparability studies between multiple lots of PF582 at the pilot scale and commercial scale.

PFNX has also completed a preclinical study using an animal model that demonstrated, when injected into the animals' eyes, PF582 and Lucentis yielded similar tolerability and pharmacological profiles.

Based on analytical and preclinical data package, the U.S. Food and Drug Administration, or FDA, granted PFNX a Biosimilar Initial Advisory Meeting which was held in January 2014 to discuss the data generated to date, PFNX's Phase 3 trial design and strategy for the comparison of European Union and the United States reference products.

In the subsequent meeting minutes, the FDA indicated that PFNX's analytical data appear acceptable to support the development of PF582 as a biosimilar candidate to Lucentis. Similarly, PFNX is in discussions with the European Union's Committee for Medicinal Products for Human Use, or CHMP.

PFNX's next most advanced product candidate is PF530, a biosimilar candidate to Betaseron (interferon beta-1b) that is marketed by Bayer AG for the treatment of multiple sclerosis and achieved over $1.4 billion in global product sales in 2013.

For PF530, PFNX plans to initiate a Phase 1 trial in the second half of 2014. PFNX believes it is the most advanced company in global development of these biosimilar products.

In addition to its two most advanced product candidates, PFNX's pipeline includes five other biosimilar candidates, as well as vaccine, generic and next generation biologic candidates.

To date, none of its product candidates have received marketing authorization from any regulatory agency, and therefore PFNX has not received revenue from the sale of any of its product candidates.

PFNX's product candidates are enabled by its patented protein production platform, Pfēnex Expression Technology®, which PFNX believes confers several important competitive advantages compared to traditional techniques for protein production, including the ability to produce complex proteins with higher accuracy and greater degree of protein purity, as well as significant speed and cost advantages.

The power of PFNX's platform has been demonstrated by its ability to move PF582 from concept to the clinic in just 24 months.

Revenue

Historical revenue has been primarily derived from monetizing Pfēnex Expression Technology® through collaboration agreements, service agreements, government contracts and reagent protein product sales, which provide for various types of payments, including upfront payments, funding of research and development, milestone payments, intellectual property access fees and licensing fees.

Currently, various government agencies are funding costs associated with proprietary novel vaccine programs. Under agreements, Strides Arcolab is responsible for funding third-party costs up to Phase 3 trials, at which time PRNX share revenue and costs associated with the development of PF530 and other specific biosimilars developed pursuant thereto.

As PFNX continues to focus its business on the development of its product pipeline, PFNX anticipate allocating fewer resources to certain aspects of protein production activities that currently generate revenue, which PFNX expects will result in a decline of service-related revenue associated with protein production.

Dividend Policy

No dividends are planned.

Intellectual Property

PFNX is the owner or licensee of a portfolio of patents and patent applications and possess substantial know-how and trade secrets which protect various aspects of its business.

PFNX is the sole owner of a patent portfolio that consists of a total of 11 U.S. issued patents and eight U.S. pending patent applications that provide material coverage for its platform technology and its lead product candidates as well as foreign granted and pending patent applications which are counterparts to certain of the foregoing U.S. patents and patent applications.

In particular, PFNX owns the following issued U.S. utility patents: U.S. Pat. Nos. 7,476,532; 7,618,799; 7,833,752; 7,985,564; 8,017,355; 8,288,127; 8,318,481; 8,455,218; 8,530,171; 8,569,015; and 8,603,824.

Additionally, PFNX owns the following U.S. non-provisional utility patent applications: U.S. Appl. Ser. Nos. 11/038,901; 11/400,840; 12/109,554; 12/610,207; 13/039,183; 13/319,844; 13/844,261; and 13/952,484.

Moreover, PFNX has licensed the following U.S. patents and U.S. patent applications from The Dow Chemical Company: U.S. Pat. Nos. 7,338,794; 7,595,173; 7,935,798; and 8,211,668; and U.S. Appl. No. 10/590,095. PFNX's U.S. issued patents expire during the time period beginning in 2026 and ending in 2031.

Competition

While PFNX believes that its Pfēnex Expression Technology®, knowledge, experience and scientific resources provides it with competitive advantages, PFNX faces potential competition from many different sources, including major pharmaceutical, generic pharmaceutical, specialty pharmaceutical and biotechnology companies.

In the event that PFNX were to market and sell any of its biopharmaceutical products, PFNX would face competition from the innovator companies, as well as any other firms developing the biosimilars that would compete with the product candidates in its pipeline and other novel products with similar indications.

For example, PF582 may compete with products by Roche as an innovator company, Sandoz International GmbH as a biosimilar company and Ophthotech Corporation as a developer of novel products.

Additionally, PF582 and Lucentis compete with globally marketed products including Eylea and Avastin (off label).

Similarly, PF530, PFNX's interferon beta-1b biosimilar candidate, may face competition from Bayer, Biocad Biopharmaceutical Company and Biogen IDEC; PF708, PFNX's teriparatide generic, may face competition from the innovator Eli Lilly, generic competition from companies like Teva, and Amgen Inc. as a developer of novel products.

Key competitive factors affecting the success of PFNX's lead biosimilar candidates, if approved, are likely to be price, the level of biosimilar and innovator competition and the availability of coverage and reimbursement from government and other third party payors.

Similarly, PFNX's novel vaccine development programs face substantial competition from major pharmaceutical and other biotechnology companies that are actively working on improved and novel vaccines.

PFNX believes that its primary competitors include Emergent BioSolutions, Inc., Vaxin, Inc., and Pharmathene, Inc.

These companies are receiving funding from BARDA for the development of a next generation anthrax vaccine. All of PFNX's novel vaccine efforts will face competition for limited government funding from other non-vaccine defensive measures as well, including medical countermeasures for biological, chemical and nuclear threats, diagnostic testing systems and other emergency preparedness countermeasures.

5% stockholders

  • Entities affiliated with The Dow Chemical Company 49.26%
  • Entities affiliated with Signet Healthcare Partners 35.44%
  • Bertrand C. Liang 6.32%
  • James C. Gale 35.44%

Use of proceeds

PFNX expects to net $59 million from its IPO. Proceeds are allocated as follows:

  • $40 million will be used to fund its ongoing and planned clinical development of PF582, which PFNX believes should be adequate to fund PF582 through completion of the currently planned Phase 3 trial;
  • $5 million will be used to fund its share of the planned Phase 3 clinical development of PF530, which PFNX believes should be adequate to fund its share of the currently planned initial Phase 3 trial through completion;
  • $10 million will be used to fund the research and development of other product candidates and preclinical products under development; and
  • the remainder will be used for working capital, capital expenditures and other general corporate purposes.

Disclaimer: This PFNX IPO report is based on a reading and analysis of PFNX'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.

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. The author has no business relationship with any company whose stock is mentioned in this article.

Source: IPO Preview: Pfenex