IPO Preview: Argos Therapeutics

| About: Argos Therapeutics, (ARGS)

Based in Durham, North Carolina, Argos Therapeutics (NASDAQ:ARGS) scheduled a $74 million IPO with a market capitalization of $216 million at a price range mid-point of $14, for the week of February 27, 2012

Argos is one of six IPOs scheduled for this week (see our IPO calendar) which includes YELP.

ARGS is a biopharmaceutical company focused on targeted small molecule solutions, for cancer and infectious diseases.

All product candidates are in Stage 1, 2 or 3 clinical trials. Large well-known companies are also targeting the same space as ARGS, see 'competition' below.

ARGS wants to IPO in the same approximate range as other biopharma companies that have no revenue, at 3.2 times book.

Because clinical trial outcomes are uncertain, by definition, and because ARGS has no strategic operating partner we would avoid ARGS on the IPO.

ARGS is a biopharmaceutical company focused on the development and commercialization of fully personalized immunotherapies for the treatment of cancer and infectious diseases based on a proprietary technology platform called Arcelis.

Using biological components obtained from each patient, ARGS's Arcelis-based immunotherapies employs a specialized white blood cell, called a dendritic cell, to activate an immune response that is specific to the patient's disease.

ARGS's most advanced product candidate is AGS-003 for the treatment of mRCC. ARGS plans to initiate a pivotal phase 3 clinical trial of AGS-003 in combination with sunitinib, an oral small molecule drug marketed under the trade name Sutent that is the current standard of care for first-line treatment of mRCC, in the second quarter of 2012.

ARGS is also developing a second Arcelis-based product candidate, AGS-004 for the treatment of HIV. ARGS is studying AGS-004 in a phase 2b clinical trial that is funded entirely by the NIH.

In addition to ARGS's Arcelis-based product candidates, the company is also developing two other product candidates based on expertise in dendritic cell biology: AGS-009, a monoclonal antibody for the treatment of lupus, which ARGS is studying in a phase 1a clinical trial, and AGS-010, a preclinical biologic compound, which ARGS is developing for organ and tissue transplantation and the treatment of autoimmune and inflammatory diseases.

ARGS has tested AGS-003 in clinical trials as a monotherapy and in combination with sunitinib for the treatment of mRCC.

ARGS expects to initiate its planned pivotal phase 3 clinical trial of AGS-003 in combination with sunitinib by activating sites for enrollment beginning in the second quarter of 2012, complete enrollment in late 2013 and have final overall survival data in the second half of 2015.

In addition, ARGS expects to have data regarding the potency of the immune responses generated by the combination of AGS-003 and sunitinib as measured by the percentage expansion or proliferation of CD8+ central and effector memory T-cells in mid-2014. CD8+ central and effector memory T-cells are a special kind of cytotoxic T lymphocytes, or T-cells, which are the cells responsible for killing the cancer cells. These T-cells are known to be associated with good clinical outcomes, are long-lived and provide durable immune responses.

ARGS is also developing a second Arcelis-based product candidate, AGS-004 for the treatment of HIV. ARGS is studying AGS-004 in a phase 2b clinical trial that is funded entirely by the National Institutes of Health

ARGS has completed two early stage clinical trials of AGS-004, and is currently conducting a phase 2b clinical trial that is funded entirely by the NIH.

ARGS expects to complete enrollment in this trial in the second half of 2012 and to complete primary endpoint analysis of the data from this trial in mid-2013.

According to the World Health Organization, the number of people living with HIV in the world was approximately 33.3 million in 2009. The Henry J. Kaiser Family Foundation estimates that more than 1.1 million people are currently living with HIV in the United States. According to the Centers for Disease Control and Prevention, the number of new cases of HIV infection in the United States is expected to remain steady at about 55,000 cases per year for the next decade.

There are several FDA-approved therapies for mRCC marketed and sold by large pharmaceutical companies. Approved monotherapies for mRCC include Nexavar® (sorafenib), marketed by Bayer Healthcare Pharmaceuticals, Inc. and Onyx Pharmaceuticals (NASDAQ:ONXX), Sutent (sunitinib) and Inlyta (axitinib), marketed by Pfizer (NYSE:PFE), AvastinTM (bevacizumab), marketed by Genentech, Inc., a member of the Roche Group, and VotrientTM (pazopanib), marketed by GlaxoSmithKline plc (NYSE:GSK), Torisel® (temsirolimus), marketed by Pfizer, and Afinitor® (everolimus), marketed by Novartis Pharmaceuticals (NYSE:NVS). In addition, there are several monotherapies in clinical development for the treatment of mRCC, including product candidates in late-stage clinical development, such as tivozanib.

There are also numerous FDA-approved treatments for HIV, primarily antiretroviral therapies marketed by large pharmaceutical companies. Generic competition has recently developed in this market as patent exclusivity periods for older drugs have expired, with more than 15 generic bioequivalents currently on the market. The presence of these generic drugs is resulting in price pressure in the HIV therapeutics market and could affect the pricing of AGS-004.

ARGS expects to net $66 million from its IPO. Proceeds are allocated as follows:

  • $30 million of the net proceeds from this offering to fund direct costs of the planned pivotal phase 3 combination therapy clinical trial of AGS-003
  • Balance to fund working capital and other general corporate purposes, including our research and development, general and administrative and other operating expenses. ARGS will use $200,000 of the net proceeds to pay a success fee to a former lender under a loan agreement that ARGS has previously repaid in full.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: Argos Therapeutics (ARGS) expects to price this week. ARGS is the focus ticker.