IPO Preview: Ocular Therapeutix

Jul.25.14 | About: Ocular Therapeutix (OCUL)

Summary

Biopharmaceutical company focused on the development and commercialization of innovative therapies for diseases and conditions of the eye using its proprietary hydrogel platform technology.

Bioresorbable hydrogel-based product candidates are designed to provide sustained delivery of therapeutic agents to the eye.

At the price range mid-point of $15, the price-to-book value ratio is 3.9.

Based in Bedford, MA, Ocular Therapeutix (NASDAQ:OCUL) scheduled a $75-million IPO on the Nasdaq, with a market capitalization of $309 million, at a price range midpoint of $15 for Friday, July 25, 2014.

The full IPO calendar is available at IPOpremium

SEC Documents

Manager, Co-Managers: Morgan Stanley, Cowen and Company, RBC Capital Markets

Joint Managers: Oppenheimer

End of lockup (180 days): Wednesday, January 21, 2015

End of 25-day quiet period: Tuesday, August 19, 2014

Summary

OCUL is a biopharmaceutical company focused on the development and commercialization of innovative therapies for diseases and conditions of the eye using its proprietary hydrogel platform technology.

OCUL's bioresorbable hydrogel-based product candidates are designed to provide sustained delivery of therapeutic agents to the eye.

In addition to its ongoing product development, OCUL has recently launched its first commercial product, ReSure Sealant, a hydrogel-based ophthalmic wound sealant approved by the FDA in January 2014 to close corneal incisions following cataract surgery.

OCUL recently received FDA approval for ReSure Sealant, and in February 2014, commercially launched this product in the United States through a network of ophthalmology-focused distributors.

Existing principal stockholders and their affiliated entities have indicated an interest in purchasing $12.7 million in shares on the IPO at the offering price, or 17%.

Valuation

Glossary

Valuation Ratios

Mrkt. Cap ($mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

Annualizing Q1 '14

Ocular Therapeutix

$309

n/a

-11.4

3.9

3.9

24%

Click to enlarge

Conclusion
The rating on OCUL is neutral-plus, because OCUL recently received FDA approval for ReSure Sealant, and in February 2014, commercially launched this product in the United States through a network of ophthalmology-focused distributors.

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

Business

OCUL is a biopharmaceutical company focused on the development and commercialization of innovative therapies for diseases and conditions of the eye using its proprietary hydrogel platform technology.

OCUL's bioresorbable hydrogel-based product candidates are designed to provide sustained delivery of therapeutic agents to the eye.

OCUL's hydrogel is a bioresorbable proprietary formulation of polyethylene glycol, or PEG, which when constituted with water, takes on a gelatinous consistency.

The product candidates in OCUL's development pipeline have the potential to overcome many of the significant limitations of existing eye drop-based therapies for ophthalmic diseases and conditions by replacing the current standard of care regimen of weeks or months of eye drop dosing with as little as a single product application.

Product candidates

OCUL's lead product candidates are OTX-DP and OTX-TP. OTX-DP is in Phase 3 clinical development for post-surgical ocular inflammation and pain.

OTX-TP is also in Phase 2 clinical development for glaucoma and ocular hypertension.

OCUL expects to report results from its Phase 3 clinical program during the first quarter of 2015 and, if the results are favorable, to submit a new drug application, or NDA, to the FDA for OTX-DP in the second quarter of 2015.

These product candidates combine OCUL's hydrogel technology with U.S. Food and Drug Administration, or FDA, approved therapeutic agents with the goal of providing sustained delivery of drug to the eye.

By focusing on the development of products based on previously approved therapeutic agents, OCUL believes that it can advance its product candidates efficiently and predictably through the development cycle, based on well-defined clinical and regulatory approval pathways.

OCUL also recently initiated a Phase 2 clinical trial of OTX-DP for the treatment of chronic allergic conjunctivitis.

Commercial product

In addition to its ongoing product development, OCUL has recently launched its first commercial product, ReSure Sealant, a hydrogel-based ophthalmic wound sealant approved by the FDA in January 2014 to close corneal incisions following cataract surgery.

OCUL recently received FDA approval for ReSure Sealant, and in February 2014, commercially launched this product in the United States through a network of ophthalmology-focused distributors.

ReSure Sealant is approved to close corneal incisions following cataract surgery, and is the first and only surgical sealant to be approved by the FDA for ophthalmic use.

In the pivotal clinical trials that formed the basis for FDA approval, ReSure Sealant provided superior wound closure and a better safety profile than sutured closure.

Cataract surgery is the most commonly performed surgical procedure in the United States.

According to Market Scope, a publisher of research and analysis on the ophthalmic market, approximately 3.65 million cataract extractions are expected to be performed in the United States in 2014.

OCUL plans to use revenue from sales of ReSure Sealant to contribute to the funding of the product development pipeline and commercialization efforts.

Target markets

OCUL's marketed product and product candidates target large and growing markets. Transparency Market Research, a provider of business information reports and services, estimates that the annual worldwide market for ophthalmic medications was $16 billion as of 2012 and is expected to increase to $21.6 billion by 2018.

Poor patient compliance in general

Poor patient compliance with eye drop regimens and the need for frequent administration of eye drops can create challenges in the successful management of ocular diseases and conditions.

For example, poor patient compliance can lead to diminished efficacy and disease progression. OCUL is developing therapies to replace standard of care eye drop regimens with its innovative drug eluting punctum plugs.

Punctum plugs

OCUL's plugs are sustained release drug delivery depots that are inserted into a natural opening called the punctum located in the inner portion of the eyelid near the nose.

The plugs are designed to release a therapeutic agent to the surface of the eye over an extended period.

OCUL's goal for its punctum plug product candidates is to change the management of many front of the eye diseases and conditions from frequent, pulsed eye drop therapy, characterized by significant variations in drug concentration over time, to longer-term, sustained delivery of therapeutic agents to improve patient outcomes.

OCUL's most advanced product candidate, OTX-DP, incorporates the steroid dexamethasone as an active pharmaceutical ingredient in a hydrogel-based drug eluting punctum plug, and is in Phase 3 clinical development for the treatment of ocular inflammation and pain following cataract surgery.

Dividend Policy

No dividends are planned.

Intellectual Property

OCUL has in-licensed all of its patent rights from Incept, LLC, or Incept, an intellectual property holding company.

The license from Incept is limited to the field of human ophthalmic diseases and conditions.

As of June 30, 2014, OCUL has licensed from Incept a total of 18 U.S. patents, five U.S. patent applications and foreign counterparts of some of these patents and patent applications.

Ten of the 18 licensed U.S. patents and four of the five licensed U.S. patent applications cover the technology that underlies OCUL's punctum plug product candidates, ReSure Sealant or its intravitreal hydrogel depot.

Competition

OCUL's potential competitors include large pharmaceutical and biotechnology companies, and specialty pharmaceutical and generic drug companies.

Potential competitors also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization.

Many of OCUL's potential competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than OCUL does.

These competitors also compete with OCUL in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, OCUL's programs.

Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.

5% stockholders

Entities affiliated with Versant Ventures - 19.0%

Entities affiliated with Polaris Ventures - 16.2%

Entities affiliated with SV Life Sciences - 15.1%

Farhad Khosravi - 6.7%

Sparta Group MA LLC Series 12 - 6.0%

Incept, LLC - 5.4%

Baxter Healthcare Corporation - 5.3%

Amarpreet Sawhney, Ph.D. - 17.1%

Charles Warden - 19.0%

Use of proceeds

OCUL intends to use the $67 million in proceeds (plus cash on hand) from its IPO as follows:

$5.0 million to $6.0 million to complete its Phase 3 clinical trials of OTX-DP for the treatment of ocular inflammation and pain following cataract surgery, and for the submission of an NDA to the FDA, assuming favorable clinical results;

$3.0 million to $4.0 million to complete its Phase 2 clinical trials of OTX-DP for the treatment of allergic conjunctivitis and for the submission of an NDA supplement to the FDA, assuming favorable clinical results;

$6.0 million to $7.0 million to complete its Phase 2b clinical trial and initiate a Phase 3 clinical trial of OTX-TP for the treatment of glaucoma and ocular hypertension;

$23.0 million to $24.0 million for other clinical and regulatory activities and for preclinical research and development activities;

$8.0 million to $9.0 million for sales and marketing activities, including the commercial launch of OTX-DP for the treatment of ocular inflammation and pain following cataract surgery, assuming FDA approval of this product, personnel costs, travel, tradeshows and other sales and marketing expenses;

$1.0 million to expand its manufacturing capacity and for manufacturing equipment;

$5.0 million to $6.0 million for the payment of principal and interest under its credit facility with MidCap and SVB; and

the remainder for working capital and other general corporate purposes, which could include the acquisition or in-licensing of other products, product candidates or technologies.

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