Seeking Alpha
, Google+ (410 clicks)
Long/short equity, special situations, momentum, event-driven
Profile| Send Message|
( followers)  

Summary

  • Switzerland-based EARS, a clinical-stage biopharmaceutical firm focused on the development of treatments for inner ear disorders, plans to raise $75.9 million in its upcoming IPO.
  • We are neutral on this IPO and suggest investors hold off.
  • While EARS has made significant headway towards receiving regulatory approval for its products, and could gain commercial traction, it is still a long way from doing so.

Auris Medical Holding AG (Pending:EARS), a clinical-stage biopharmaceutical firm focused on the development of treatments for inner ear disorders, plans to raise $75.9 million in its upcoming IPO.

We are neutral on this IPO and suggest investors hold off.

While EARS has made significant headway towards receiving regulatory approval for its products, and could gain commercial traction, it is still a long way from doing so.

The Zug, Switzerland-based firm will offer 6.9 million shares at an expected price range of $10-$12 per share. If the IPO can find the midpoint of that range at $11 per share, EARS will command a market value of $285 million.

EARS filed on June 30, 2014.

Lead Underwriters: Jefferies LLC; Leerink Partners LLC

Underwriters: JMP Securities LLC; Needham & Company, LLC

Summary: Treatments For Inner Ear Disorder

EARS is a clinical-stage biopharmaceutical firm seeking to develop treatments for disorders of the inner ear.

The firm's lead product candidate, AM-101, is currently in Phase 3 clinical development for acute inner ear tinnitus. AM-101 is being developed under a special protocol assessment from the FDA. EARS is also in the process of developing AM-111 for acute inner ear hearing loss; the firm expects to begin Phase 3 clinical development in late 2014. AM-111 has received orphan drug designation from the FDA.

The firm states in its S-1 filing that it believes AM-101 and AM-111 to be the only candidates that have demonstrated positive efficacy in clinical trials for their respective treatment targets. EARS has two other product candidates, AM-102 and AM-123, currently in pre-clinical development for tinnitus and rhinology, respectively.

EARS' products are administered through intratympanic injection, meaning that they are first injected into the middle ear and then release their active ingredients to diffuse into the inner ear. This procedure allows for targeted drug delivery and minimizes exposure to patient's bloodstream. The procedure is performed under local anesthesia.

EARS plans to retain commercial rights for its products in the U.S. and key European markets and to seek partnerships to distribute the products elsewhere.

Valuation

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

Revenue: $0.00

Net Loss: ($6,628,915.00)

Total Assets: $23,599,131.00

Total Liabilities: $19,091,631.00

Stockholders' Equity: $4,507,500,000.00

EARS' non-existent revenues are typical of a clinical-stage biopharmaceutical firm and should not be construed as an indication of the firm's potential to generate future revenues. The firm will not be able to generate significant revenues until one or more of its product candidates have been commercialized.

Major Competitors

EARS is not without competition for the development of treatments for inner ear conditions. The firm identifies its major competitors as Otonomy, Inc. and Sound Pharmaceuticals Inc., both of which are private U.S. companies. Other, larger competitors may emerge in the future.

Management Highlights

Founder Thomas Meyer serves as the chairman and CEO of EARS, which he founded in 2003. He previously worked in various capacities for Disetronic Group, a leading Swiss supplier of precision infusion and injection systems, including deputy CEO and CEO.

Before he joined Disetronic, Dr. Meyer advised several Swiss companies in strategy, marketing and corporate finance. He received a Ph.D. in business administration from the University of Fribourg, Switzerland.

Conclusion: Not Yet A Buy

We are neutral on this IPO.

EARS has made significant headway towards receiving regulatory approval for its products from the FDA, and the level of unmet need for the indications treated by its products could lead to significant profits once the firm has commercialized its products.

However, there is no guarantee that the firm will actually gain commercial traction with its products. Still, we believe that this IPO is a better bet than most pre-commercial firms.

We suggest investors wait on this IPO.

We invite readers wishing to join the discussion on IPOs to click the +FOLLOW button above the title of this article -- and those looking for the latest developments to click +Get real-time alerts.

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

Source: Listen Closely For Auris Medical Holding IPO