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Summary

  • Clinical-stage biopharmaceutical company focused on the development of novel products for the treatment of inner ear disorders.
  • 2 candidates in Phase 3 trials.
  • Price-to-book is 3.6. 25% spoken for on the IPO.

Based in Zug, Switzerland, Auris Medical Holding AG (NASDAQ:EARS) scheduled a $76 million IPO on the Nasdaq with a market capitalization of $283 million at a price range midpoint of $11 for Friday, August 1, 2014.

The full IPO calendar is available at IPOpremium

SEC Documents

Manager, Co-Managers: Jefferies, Leerink Partners

Joint Managers: JMP Securities, Needham & Company

End of lockup (180 days): Wednesday, January 28, 2015

End of 25-day quiet period: Tuesday, August 26, 2014

Summary

EARS is a clinical-stage biopharmaceutical company focused on the development of novel products for the treatment of inner ear disorders.

Existing investors and affiliates have spoken for $19.25 million of the IPO, or 25% of the IPO.

Valuation

Glossary

Valuation Ratios

Mrkt Cap ($mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

annualizing Q1 '14

Auris Medical Holding AG

$283

n/a

-12.0

3.6

3.3

27%

Conclusion

The rating is neutral plus

2 candidates in Phase 3 trials

3.6 times book

25% spoken for on the IPO

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

Business

EARS is a clinical-stage biopharmaceutical company focused on the development of novel products for the treatment of inner ear disorders.

EARS's most advanced product candidate, AM-101, is in Phase 3 clinical development for acute inner ear tinnitus under a special protocol assessment, or SPA, from the FDA, indicating that the FDA has evaluated the proposed design, size, and planned analysis of the trial and determined that they are acceptable to support regulatory approval of the product candidate with respect to effectiveness of the indication studied.

In two recently completed Phase 2 clinical trials, AM-101 demonstrated a favorable safety profile, meaning a beneficial benefit-to-risk ratio based on the incidence and severity of adverse events, and statistically significant, meaning that the results obtained are not likely due to chance, improvement in tinnitus loudness and other patient reported outcomes.

EARS is also developing AM-111 for acute inner ear hearing loss, and EARS expects to begin Phase 3 clinical development in the fourth quarter of 2014.

EARS expects to have top-line Phase 3 clinical data for AM-101 and AM-111 in early 2016 and late 2016, respectively.

Both acute inner ear tinnitus and hearing loss are conditions for which there is high unmet medical need, and EARS believes that it has the potential to be the first to market in these indications.

Two product candidates in Phase 3 clinical trials

With two product candidates in Phase 3 clinical trials, EARS believes it is currently the clinically most advanced company working on inner ear therapeutics.

EARS believes that AM-101 and AM-111 are the only drug candidates that have demonstrated positive efficacy in randomized placebo-controlled clinical trials in acute inner ear tinnitus and acute inner ear hearing loss.

EARS's products are protected through intellectual property rights and, in addition, orphan drug status has been granted to AM-111.

Orphan drug designation may provide for a period of orphan drug exclusivity, which means that the FDA may not approve any other applications to market the same drug for the same indication, except in very limited circumstances, and entitles a drug sponsor to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages and FDA user fee exemptions.

The granting of orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.

EARS's product candidates are injected under local anesthesia into the middle ear by a technique called intratympanic, or i.t., injection.

Once injected into the middle ear, the active substance, which is formulated in a biocompatible gel, diffuses into the inner ear.

The procedure is short, safe, has a long history of use and allows for highly targeted drug delivery with minimal systemic exposure, which is what occurs when the drug enters into the general blood stream.

As with any local (topical) treatment administration, intratympanic injection allows for localized drug delivery to the target site of action.

The procedure is performed by an ear, nose and throat, or ENT, specialist on an outpatient basis over one or more visits.

Dividend Policy

No dividends are planned.

Intellectual Property

As of July 15, 2014 EARS owns two (2) issued U.S. patents and seven (7) pending U.S. patent applications along with foreign counterparts of such patents and applications in various jurisdictions.

EARS co-owns both of its issued U.S. patents, and one of its pending patent applications with INSERM, along with their foreign counterparts, pursuant to the terms of its co-ownership and exploitation agreement.

In addition, EARS co-owns two of its pending applications with Xigen pursuant to the terms of its collaboration and license agreement.

In addition, as of July 15, 2014, EARS has exclusively licensed from Xigen eleven (11) issued U.S. patents and three (3) pending U.S. patent applications, along with their foreign counterparts in various jurisdictions that cover the composition of matter or method of use of JNK ligand peptides in a limited field including the intratympanic treatment of acute sensorineural hearing loss.

With respect to its issued patents in the United States and Europe, EARS may also be entitled to obtain a patent term extension to extend the patent expiration date.

For example, in the United States, EARS can apply for a patent term extension of up to 5 years for one of the patents covering a product once the product is approved by the FDA.

The exact duration of the extension depends on the time EARS spends in clinical trials as well as getting a new drug application approval from the FDA.

Competition

EARS may face competition from different sources with respect to its product candidates AM-101 and AM-111 and its pipeline products or any product candidates that EARS may seek to develop or commercialize in the future.

Because there are a variety of means to block the activity of NMDA receptors or the JNK pathway, EARS's patents and other proprietary protections for AM-101 and AM-111 may not prevent development or commercialization of all viable product candidates that are different from its lead product candidates.

5% stockholders

Sofinnova Ventures Partners VIII, L.P. 19.3%

Sofinnova Capital VII FCPR 18.6%

Entities affiliated with ZKB 11.4%

Entities affiliated with Idinvest Partners 9.1%

Thomas Meyer, Ph.D. 34.9%

Use of proceeds

EARS intends to use the $69 million in proceeds from its IPO with cash on hand as follows:

  • $43 million to $48 million to fund research and development expenses for AM-101 up to the read out of data from the Phase 3 trial;
  • $29 million to $32 million to fund research and development expenses for AM-111 up to the read out of data from the Phase 3 trial;
  • $5 million to $6 million to fund other research and development activities; and
  • the remainder for working capital and other financial corporate purposes.

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

Source: IPO Preview: Auris Medical Holding AG