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Summary

  • Biotechnology company focused on discovering and developing therapeutic protein and antibody products for life-threatening, drug-resistant infectious diseases, particularly those treated in hospital settings.
  • High price to book, 5.6. High cash burn rate (P/E of -4.6). Product candidates not yet in clinical trials.
  • Applied to list its common stock, the Class A Warrants, the Class B Warrants and the units on the NASDAQ Capital Market under the symbols “CFRX”, “CFRXW”, “CFRXZ”.

Based in Yonkers, N.Y., ContraFect (NASDAQ:CFRX) scheduled a $20 million IPO on the Nasdaq with a market capitalization of $96 million at a price range midpoint of $5.50 for Tuesday, July 29, 2014.

The full IPO calendar is available at IPOpremium

SEC Documents

Manager, Co-Managers: Maxim Group

End of lockup (180 days): Monday, January 26, 2015

End of 25-day quiet period: Monday, August 25, 2014

Summary

CFRXU is a biotechnology company focused on discovering and developing therapeutic protein and antibody products for life-threatening, drug-resistant infectious diseases, particularly those treated in hospital settings.

Unit deal

CFRXU has applied to list its common stock, the Class A Warrants, the Class B Warrants and the units on the NASDAQ Capital Market under the symbols "CFRX", "CFRXW", "CFRXZ" and "CFRXU", respectively.

Valuation

Glossary

Accumulated deficit ($mm)

-$63

Per share dilution

-$4.53

Valuation Ratios

Mrkt Cap ($mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

annualized Q1 '14

ContraFect (CFRXU)

$96

n/a

-4.6

5.6

5.7

21%

Conclusion

The rating is negative

High price to book, 5.6

High cash burn rate (P/E of -4.6)

Product candidates not yet in clinical trials

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

Business

CFRXU is a biotechnology company focused on discovering and developing therapeutic protein and antibody products for life-threatening, drug-resistant infectious diseases, particularly those treated in hospital settings.

Due to drug-resistant and newly emerging pathogens, hospital acquired infections are currently the fourth leading cause of death in the United States, following heart disease, cancer and stroke. CFRXU intends to address drug-resistant infections using its therapeutic product candidates from its lysin and monoclonal antibody platforms to target conserved regions of either bacteria or viruses (regions that are not prone to mutation).

Lysins are enzymes that are produced in the life cycle stage of a bacteriophage, a virus that infects and kills bacteria. Lysins can digest (or "lyse") bacterial cell walls and are fundamentally different than antibiotics because they kill bacteria immediately upon contact.

CFRXU believes the properties of its lysins make them suitable for the treatment of antibiotic-resistant organisms that can cause serious infections such as Staphylococcus aureus ("Staph aureus") bacteremia, pneumonia and osteomyelitis (infection of a bone), and the treatment of biofilm-related indications for infected prosthetic joints, indwelling devices and catheters (biofilms are protective coatings produced by pathogenic bacteria).

In addition to its lysins, CFRXU is exploring therapies using monoclonal antibodies ("mAbs") that block and disarm virulence factors of bacteria and viruses, rendering them vulnerable to the body's natural immune response. CFRXU's product candidates have not yet entered clinical trials.

CFRXU's most advanced product candidates are CF-301, a lysin for the treatment of Staph aureus bacteremia, and CF-404, a combination of mAbs for the treatment of life-threatening seasonal and pandemic varieties of influenza.

CFRXU's Market Opportunity

Drug-resistant and newly emerging pathogens have become a significant threat both inside and outside the hospital. While bacteria and viruses are typically treated with antibiotics and antiviral drugs, many of these microbes have developed resistance mechanisms that arise from mutation and cause current treatments to be ineffective.

As a result, CFRXU believes that individual antibiotics will eventually become less active or inactive as drug-resistant bacteria continue to develop.

For example, over 60% of Staph infections are caused by methicillin-resistant Staph aureus ("MRSA") bacteria that are often resistant to the primary antibiotic initially used in their therapy. Viruses also have become resistant through mutation and the survival of strains that avoid immune attack. CFRXU's therapeutic product candidates are intended to treat these antibiotic-resistant infections and viruses through novel methods.

Dividend Policy

No dividends are planned.

Intellectual Property

CFRXU's lysin patent portfolio consists of seven issued U.S. patents (licensed on an exclusive basis from Rockefeller) and six active patent applications that CFRXU has filed.

CFRXU holds two issued composition of matter and methods of treatment patents relating to streptococcus in the United States, one for lysins targeting group A streptococcus (U.S. 7,569,223) and one for lysins targeting group B streptococcus (U.S. 8,105,585), for which there is also a granted European counterpart (EP 06813511).

The first U.S. patent expires in March 2024, while the second U.S. patent and its European counterpart expire in August 2026. CFRXU holds four issued composition of matter and methods of treatment patents in the United States (U.S. 7,402,309, U.S. 8,580,553, U.S. 7,638,600 and U.S. 8,389,469) for lysins targeting bacillus anthracis (anthrax) which expire between May 2023 and May 2026.

CFRXU holds one issued composition of matter and methods of treatment patent in the United States (U.S. 7,582,291) for lysins targeting enterococcus which expires in March 2026.

Of the six active patent applications, three support patent coverage of CF-301 for composition of matter and methods of treatment and were filed between April 2012 and May 2013. Upon issuance CFRXU expects these patents to expire between April 2032 and May 2033.

The additional three active patent applications are for patent coverage of additional alternative lysins and methods.

CFRXU's influenza patent portfolio consists of four active patent applications, three of which CFRXU has licensed from Trellis. The three active patent applications filed by Trellis cover compositions and methods relating to influenza antibodies and were filed between June 2011 and February 2014.

Upon issuance CFRXU expects these patents to expire between June 2031 and February 2035. Another patent application for methods and compositions for administration was filed by CFRXU in March 2014 and upon issuance CFRXU expects a patent to expire in March 2034.

Competition

CFRXU competes directly and indirectly with other pharmaceutical companies, biotechnology companies and academic and research organizations in developing therapies to treat diseases.

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

CFRXU competes with companies that have products on the market or in development for the same indications as its product candidates. CFRXU may also compete with organizations that are developing similar technology platforms.

5% stockholders

Alpha Spring Limited 13.3%

Liberty Charitable Remainder Trust 9.3%

River Charitable Remainder Trust 5.2%

Robert C. Nowinski, Ph.D. 17.4%

Isaac Blech 17.5%

Shengda Zan 13.9%

Use of proceeds

CFRXU expects to receive $16 million from its IPO. The funds are allocated as follows:

$8.7 million to fund the costs of pre-clinical and early stage clinical development of CF-301 for the treatment of Staph aureus bacteremia and CF-404, our antibody combination for the treatment of influenza;

$3.2 million to fund research and development, to build our product platform and advance other research programs from our lysin portfolio; and

remainder for working capital and other general corporate purposes, including the additional costs associated with being a public company and the $1.4 million settlement payment to MorphoSys described under "Business-Legal Proceedings."

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

Source: IPO Preview: ContraFect