IPO Preview: Marinus Pharmaceuticals

Jul.31.14 | About: Marinus Pharmaceuticals (MRNS)

Summary

Clinical stage biopharmaceutical company focused on developing and commercializing innovative neuropsychiatric therapeutics.

Priced at 2.9 times book. In Phase 2 clinical trials.

19% of the IPO is spoken for.

Based in New Haven, CT, Marinus Pharmaceuticals (NASDAQ:MRNS) scheduled a $52 million IPO on the Nasdaq with a market capitalization of $159 million at a price range midpoint of $13 for Thursday, July 31, 2014.

The full IPO calendar is available at IPOpremium

SEC Documents

Manager, Co-Managers: Stifel, JMP Securities

Joint Managers: Oppenheimer, Janney Montgomery Scott

End of lockup (180 days): Tuesday, January 27, 2015

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

Summary

MRNS is a clinical stage biopharmaceutical company focused on developing and commercializing innovative neuropsychiatric therapeutics.

Valuation

Glossary

Accumulated deficit ($mm)

-$64

Per share dilution

-$8.47

Valuation Ratios

Mrkt Cap ($mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

annualizing Q1 '14

Marinus Pharmaceuticals

$160

n/a

-17.9

2.9

2.9

33%

Click to enlarge

Conclusion

The rating is neutral

Priced at 2.9 times book.

19% of the IPO is spoken for

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

Business

MRNS is a clinical stage biopharmaceutical company focused on developing and commercializing innovative neuropsychiatric therapeutics.

MRNS's clinical stage product candidate, ganaxolone, is a small molecule that is a synthetic analog of allopregnanolone, an endogenous neurosteroid produced in the central nervous system that modulates the brain neurotransmitter gamma-aminobutyric acid, or GABA.

MRNS's lead indication for ganaxolone is as an adjunctive, or add-on, therapy for the treatment of partial, also known as focal, onset seizures in adults with epilepsy.

By targeting the same spectrum of GABAA receptors as endogenous allopregnanolone, ganaxolone delivers its therapeutic benefit through a natural mechanism that MRNS believes may offer safety and efficacy advantages compared to other marketed antiepileptic medications.

Clinical trials

MRNS has completed a Phase 2 clinical trial in 147 patients with focal onset seizures demonstrating that patients who added ganaxolone to their medication regimen experienced a statistically significant reduction in seizures as compared to patients who added placebo.

MRNS is currently enrolling patients in a randomized Phase 2b clinical trial, which MRNS intends to expand so that it may serve as one of its adequate and well-controlled clinical trials in a registration filing with the United States Food and Drug Administration, or FDA, or the European Medicines Agency, or EMA, for ganaxolone in epilepsy. MRNS expects data from this trial in the second half of 2015.

Ganaxolone in FXS

FXS is a genetic condition that causes intellectual disability, behavioral and learning challenges and various physical characteristics.

Approximately one million individuals in the United States have, or are at risk for developing, a Fragile X-associated disorder, with approximately 100,000 people having FXS.

There are no known cures or approved therapies for FXS at the present time. Treatment approaches focus primarily on supportive care and medications addressing development delays, learning disabilities, and social and behavioral problems caused by the disease.

FXS is caused by a genetic mutation. In animal models of this mutation certain brain regions show lower levels of the extrasynaptic GABAA receptors and reduction of proteins and enzymes responsible for GABA function.

As a result of ganaxolone's ability to modulate GABA function, MRNS believes that there is a strong rationale for studying ganaxolone for treatment of behaviors associated with FXS in children.

MRNS is currently conducting a Phase 2 proof-of-concept randomized, placebo-controlled, clinical trial in approximately 60 FXS patients.

This trial is being conducted in collaboration with the MIND Institute at the University of California, Davis, which receives funding from the DoD for the trial. MRNS expects the trial to be completed during the middle of 2015.

Broad range

In addition, MRNS believes ganaxolone has potential in a broad range of neuropsychiatric disorders, including orphan indications. MRNS has generated proof-of-concept data for ganaxolone in the treatment of refractory pediatric seizures and as monotherapy for adult refractory focal onset seizures.

MRNS currently has a Phase 2 proof-of-concept pediatric clinical trial in progress for ganaxolone as a treatment for behaviors in Fragile X Syndrome, or FXS, and MRNS is initiating an expanded access protocol under its epilepsy investigational new drug application, or IND, for the use of ganaxolone in the treatment of PCDH19 female pediatric epilepsy.

Both disorders have been related to mutations affecting neurosteriod signaling at extrasynaptic GABAA receptors and MRNS believes both are potential orphan indications.

MRNS plans to further pursue other potential indications related to its mechanism when non-dilutive opportunities arise.

Ganaxolone and allopregnanolone

The effects of allopregnanolone have been studied for over two decades and its role in controlling seizures and improving anxiety, mood and sleep through positive modulation of GABAA type receptors is well documented.

Despite these positive characteristics, MRNS believes allopregnanolone is not suitable for chronic use due to potential undesired steroidal effects.

Ganaxolone was designed to have the same GABA modulation effects as allopregnanolone without steroidal effects. Ganaxolone and allopregnanolone differ from other GABAA agents by interacting with unique binding sites on the GABAA receptor that are located both within, or synaptic, and outside, or extrasynaptic, the GABA synapse. Ganaxolone's activation of the extrasynaptic receptor is a unique mechanism that provides stabilizing effects that MRNS believes differentiates it from other drugs that increase GABA signaling.

Preclinical studies provide evidence that the GABA modulatory activity of ganaxolone is responsible for its anticonvulsive activity in epileptic seizures and its antianxiety effects in FXS and other neuropsychiatric disorders.

Dividend Policy

No dividends are planned.

Intellectual Property

As of March 31, 2014, MRNS's patent portfolio contains seven United States patents and corresponding foreign patents and patent applications directed to solid and liquid ganaxolone formulations and methods for the making and use thereof.

These patents expire in 2026, excluding accounting for possible patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Act, or for possible pediatric exclusivity. Corresponding foreign patents have been granted in Australia, Canada, Eurasia, Japan, New Zealand and Singapore. Corresponding foreign patent applications are pending in China, Europe, India, Israel, Japan, Mexico, South Africa and South Korea.

MRNS has not licensed any rights to practice these patents in any of these territories.

Pursuant to its agreement with Domain Russia Investments Limited, or DRI, MRNS has assigned patent rights, which rights were subsequently assigned to NovaMedica LLC, whereby MRNS licensed its patents, along with the rights to develop and commercialize ganaxolone, in Russia and certain other eastern European nations.

Competition

There are a variety of available therapies marketed for neuropsychiatric disorders.

In many cases, these products are administered in combination to enhance efficacy or to reduce side effects.

Some of these drugs are branded and subject to patent protection, some are in clinical development and not yet approved, and others are available on a generic basis.

Many of these approved drugs are well established therapies or products and are widely accepted by physicians, patients and third-party payors. Insurers and other third-party payors may also encourage the use of generic products.

More established companies have a competitive advantage over MRNS due to their greater size, cash flows and institutional experience.

Compared to MRNS, many of MRNS's competitors have significantly greater financial, technical and human resources.

5% stockholders

Domain Partners VI, L.P., DP VI Associates, L.P. and Domain Associates, LLC 26.0%

Canaan VII L.P. 22.5%

Sofinnova Venture Partners VI, L.P. 16.9%

RusnanoMedInvest 15.4%

Foundation Medical Partners 7.2%

Use of proceeds

MRNS intends to use the $46 million in proceeds from its IPO as follows:

$16 million to increase the size of its Phase 2b clinical trial for subjects with focal onset seizures;

$10 million to complete manufacturing scale-up, conduct related Phase 1 pharmacokinetic studies and other critical path activities for ganaxolone in patients with focal onset seizures and complete development of intravenous ganaxolone formulation;

$7 million to complete other preclinical studies, including an animal carcinogenicity study;

$2.5 million to add investigator sites to accelerate enrollment in its randomized, placebo-controlled, crossover Phase 2 clinical trial for FXS and to initiate a proof-of-concept trial for PCDH19 female pediatric epilepsy.

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