Too Early To Tell For Atara Biotherapeutics IPO

Jul.23.14 | About: Atara Biotherapeutics (ATRA)

Summary

ATRA, a clinical-stage biopharmaceutical firm, engaged in the development of treatments for muscle wasting conditions, plans to raise $75.0 million in its upcoming IPO.

While we like CEO Ciechanover's considerable background in pharma and venture capital, we believe that the firm is still too early in its development to be a definitive buy.

ATRA is still a great distance from receiving regulatory approval for any of its product candidates, let alone from successfully commercializing them.

Atara Biotherapeutics, Inc. (Pending:ATRA), a clinical-stage biopharmaceutical firm engaged in the development of treatments for muscle wasting conditions, plans to raise $75.0 million in its upcoming IPO.

The Brisbane, California-based firm will offer 5.0 million shares at an expected price range of $14-$16 per share. If the IPO can find the midpoint of that range at $15 per share, ATRA will command a market value of $305 million.

ATRA filed on June 20, 2014.

Lead Underwriters: Citigroup Global Markets Inc; Goldman Sachs & Co

Underwriters: Jefferies LLC

Summary: Treatments For Muscle-Wasting Conditions

ATRA is a clinical-stage biopharmaceutical firm seeking to develop novel therapeutics for muscle wasting conditions and cancers by targeting myostatin and activin proteins, which are related to the muscle maintenance and growth.

The firm's lead product candidate, PINTA 745, is a peptibody that inhibits myostatin; a Phase 1 study of the molecule found that a month of weekly dosing led to a statistically significant increase in muscle mass. PINTA 745 is currently in a Phase 2 clinical trial for protein-energy wasting, a common condition in end-stage renal disease (ESRD) patients.

Aside from increasing muscle mass, clinical evidence suggests that PINTA 745's half life in the human body of four days affords strong control over dosing for doctors and that PINTA 745 has useful anti-inflammatory properties.

The firm estimates that there are currently some 800,000 patients suffering from protein-energy wasting.

ATRA's second product candidate, known as STM 434, is designed to treat ovarian cancer and other solid tumors. STM 434 binds to Activin, a protein associated with ovarian cancer as well as larger tumors and poorer treatment outcomes. The firm plans to begin a Phase 1 clinical study of STM 434 in the second half of 2014.

The firm notes in its S-1 filing that it has five other molecules currently in preclinical development. ATRA holds worldwide rights to all of its portfolio, with the exception of PINTA 745 in Japan. All of the firm's programs were initially developed at Amgen Inc. (NASDAQ:AMGN).

Click to enlarge

Source: Atara Biotherapeutics website

Valuation: Pre-Commercial Losses, As Expected

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

Revenue: $0.00

Net Loss: ($7,049,000.00)

Total Assets: $62,866,000.00

Total Liabilities: $2,998,000.00

Stockholders' Equity: ($14,704,000.00)

ATRA's lack of revenues is typical of a pre-commercial biopharmaceutical firm, and should not be taken as an indication of the firm's potential for future success. ATRA will not be able to generate significant revenues until it has commercialized one or more of its product candidates.

Competitors

ATRA notes in its S-1 filing that it believes PINTA 745 to be the only potential therapeutic in clinical development to treat protein-energy wasting. However, PINTA 745 would have to contend with current treatment options, including nutritional supplements, medical marijuana, and some steroids.

Some well-established pharmaceutical companies are also seeking to develop drug candidates for other applications related to muscle wasting, notably including Eli Lilly & Co (NYSE:LLY), Pfizer Inc (NYSE:PFE), Ligand Pharmaceuticals (NASDAQ:LGND), Regeneron Pharmaceuticals (NASDAQ:REGN), and Novartis AG (NYSE:NVS). Some potentially competing firms have access to greater financial, marketing, and technical capacities than ATRA

Impressive Management

President and CEO Isaac E. Ciechanover, M.D. has served in his current roles and as a member of ATRA's board since its August 2012 founding.

Dr. Ciechanover was previously a partner at venture capital firm Kleiner Perkins Caufield & Byers. He also worked in various roles for Celgene Corporation, most recently as Executive Director for Business Development. Dr. Ciechanover has also held business development and venture capital positions at Amylin Pharmaceuticals, Pfizer, and Pequot Ventures.

Dr. Ciechanover holds a B.A. from Stanford University, an M.Phil. in Epidemiology from Cambridge University, an M.D. from Weill Cornell Medical College, and an M.B.A. from Harvard Business School.

Conclusion: Not Yet A Buy

We are neutral on this IPO.

ATRA is still a great distance from receiving regulatory approval for any of its product candidates, let alone from successfully commercializing them.

That said, if ATRA was able to gain approval for PINTA 745, the molecule could easily turn out to be a home run given the lack of treatment options currently available for protein-energy wasting.

We also like CEO Ciechanover's considerable background in both the pharmaceutical industry and in venture capital; however, we believe that the firm is still too early in its development process to make ATRA a definitive buy.

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Note: As a large sample of information sources does not yet exist for ATRA, we have taken much of the information for this article directly from ATRA's S-1 filing.

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.