IPO Preview: Rib-X Pharmaceuticals

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 |  About: Rib-X Pharmaceuticals (RIBX), Includes: MRK, SNY
by: IPOdesktop

Based in New Haven, CT, Rib-X Pharmaceuticals (RIBX) scheduled a $75 million IPO with a market capitalization of $204 million at a price range mid-point of $13 for Wednesday, May 9, 2012. [S-1]

RIBX is one of 12 IPOs scheduled for the week of May 7 (Full IPO calendar here).

Manager: Deutsche Bank Securities.

SUMMARY

RIBX us a money losing pharmaceutical in clinical trials, but has a very strong partner, Sanofi (NYSE:SNY), that has already paid RIBX $22 million dollars since June, 2011.

Sanofi S.A. is a French multinational pharmaceutical company headquartered in Paris, France, the world's fourth-largest by prescription sales.

CONCLUSION

RIBX is worth watching over time, but it seems prudent to pass on the IPO at the current time. RIBX lost $38 million in 2011.

BUSINESS

RIBX is a biopharmaceutical company developing new antibiotics to provide superior coverage, safety and convenience for the treatment of serious and life-threatening infections.

RIBX's proprietary drug discovery platform is based on Nobel Prize-winning science, and provides an atomic-level, three-dimensional understanding of interactions between drug candidates and their bacterial targets and enables RIBX to systematically engineer antibiotics with enhanced characteristics.

Delafloxacin

The most advanced product candidate, delafloxacin, is intended for use as an effective and convenient first-line therapy primarily in hospitals prior to the availability of a specific diagnosis.

Unlike currently available first-line treatments, delafloxacin has the potential to offer broad-spectrum coverage as a monotherapy, including for methicillin-resistant Staphylococcus aureus, or MRSA, with both intravenous and oral formulations. Delafloxacin has completed four Phase 2 clinical trials, including a Phase IIb clinical trial for the treatment of acute bacterial skin and skin structure infections, or ABSSSI.

Based on the results from the Phase 2b clinical trial, RIBX plans to start first of two planned Phase III trials for the treatment of ABSSSI in the second half of 2012.

Radezolid

RIBX's second product candidate, radezolid, is a next-generation, IV/oral oxazolidinone, designed to be a potent antibiotic with a safety profile permitting long-term treatment of resistant infections, including those caused by MRSA.

RIBX has completed two Phase II clinical trials of radezolid. RIBX is also pursuing RX-04, a preclinical program partnered with Sanofi, S.A., which has produced new classes of antibiotics designed to combat the most difficult-to-treat, multi-drug resistant Gram-positive and Gram-negative bacteria.

PRIOR FUNDING

RIBX has funded operations primarily through private placements of convertible preferred stock and convertible debt, upfront and milestone payments under RIBX's collaboration with Sanofi, government tax credit programs and research grants.

Since inception in October 2000 through December 31, 2011, RIBX has received an aggregate of $218 million in such funding, which includes:

  • $122.4 million from the sales of convertible preferred stock;
  • $71 million from the issuance of convertible notes and common stock warrants;
  • $22 million in upfront and milestone payments under our collaboration with Sanofi; and
  • $2.5 million in government tax credit payments and research grants.

SANOFI IS A STRATEGIC PARTNER

Sanofi S.A. is a French multinational pharmaceutical company headquartered in Paris, France, the world's fourth-largest by prescription sales

In June 2011, RIBX entered into a collaboration and license agreement with Sanofi related to the RX-04 program. Under this agreement, Sanofi has the right to license an unlimited number of product candidates targeting this discrete binding site within the ribosome.

RIBX retains all rights pertaining to its proprietary drug discovery platform, including all other binding sites within the ribosome and all future programs, as well as to any RX-04 compound that Sanofi does not exercise its option to develop during the three-year term of the collaboration.

RIBX has received $22.0 million through March 31, 2012 in upfront and milestone payments under the collaboration, including the receipt of a payment of $3.0 million from Sanofi in January 2012 for the achievement of a research milestone.

For each RX-04 product developed by Sanofi, RIBX is eligible for up to $9.0 million in potential research milestone payments, up to $27.0 million in potential development milestone payments relating to initiation of Phase 1, 2 and 3 clinical trials, up to $50.0 million in potential regulatory milestone payments relating to approvals in various jurisdictions including the United States, the European Union and Japan, up to $100.0 million in potential commercial milestone payments, and tiered percentage royalties of up to 10% on sales from products commercialized under the agreement, if any.

RIBX also have the right under the collaboration to co-commercialize one RX-04 product of RIBX's choosing with Sanofi in the United States.

RIBX is currently collaborating with Sanofi on ongoing preclinical development and lead generation and, as part of a comprehensive safety assessment, RIBX has just completed in vitro and in vivo profiling of the first cohort of leads from the RX-04 program that demonstrated strong potency and efficacy.

U. S. CONGRESS

Proposed legislation before Congress specific to antibiotics may have a material impact on antibiotic drug development.

In the past few months, identical bills intended to encourage development of antibiotics were introduced in the U.S. House and Senate. The Generating Antibiotic Incentives Now Act, or GAIN, would provide incentives for the development of infectious disease products to address the growing epidemic of antibiotic resistant infections.

PATENT TERM RESTORATION

If RIBX does not obtain protection under the Hatch-Waxman Amendments and similar foreign legislation by extending the patent terms and obtaining data exclusivity for RIBX's product candidates, RIBX's business may be materially harmed.

INTELLECTUAL PROPERTY

As of the date of April 24, 2012, RIBX has an exclusive license from Yale University under which RIBX possess rights to certain patents, patent applications and other intellectual property related to the high resolution X-ray crystal structure of the 50S ribosome from Haloarcula marismortuii, as well as additional technology related to 50S ribosome structures from Haloarcula marismortuii mutants.

In addition, under RIBX's license from Yale, RIBX has further rights related to 70S ribosome structures from Thermus thermophilus. RIBX has developed additional technology both jointly with Yale and independently.

COMPETITION

RIBX's most advanced product candidate, delafloxacin, is being developed as a broad spectrum antibiotic with MRSA coverage for first line use in the hospital setting.

In this treatment setting, if approved, delafloxacin would compete with a number of currently-marketed antibiotics, including Tygacil and Teflaro, and antibiotics currently in Phase 3 development, including omadocycline/PTK-0796, a tetracycline under development by Paratek Pharmaceuticals, Inc.

Given its favorable safety profile, potential for a convenient IV-to-oral switch and potency against Gram-positive infections, including MRSA, RIBX believes that delafloxacin would also compete with currently marketed antibiotics used for serious, Gram-positive infections.

These include vancomycin, a generic drug that is manufactured by a variety of companies, Zyvox, Cubicin (CBST) and telavancin, marketed as Vibativ.

RIBX's second product candidate, radezolid, represents a differentiated oxazolidinone with broader coverage and an improved safety profile with the potential for widespread use as a treatment for MRSA and other Gram-positive infections in vulnerable populations or requiring long-term therapy.

If approved, RIBX believes that radezolid would compete with a number antibiotics targeting serious Gram-positive infections, including MRSA. These include currently marketed antibiotics such as vancomycin, Zyvox, Cubicin and Vibativ, as well as antibiotics currently in Phase 3 development such as dalbavancin, oritavancin, tedizolid and Taksta. RIBX also expects that its product candidates, if approved, would compete with future generic versions of currently marketed antibiotics.

USE OF PROCEEDS

RIBX expects to net $66.2 million from its IPO. IPO proceeds are allocated to the following:

  • $32.0 million to fund the remaining estimated cost of the first planned Phase III clinical trial with the IV formulation of delafloxacin for the treatment of ABSSSI;
  • $16.0 million to fund ongoing research and development activities for RX-04, RX-05 and RX-06 programs; and
  • $9.7 million to pay scheduled principal and interest through April 2014 under a loan agreement with Oxford Finance LLC bearing interest at a rate of 9.1% per annum and maturing on June 1, 2015, the proceeds from which have been used and will continue to be used to fund RIBX's ongoing operations.

RIBX believes that the net proceeds from this IPO, the amount RIBX anticipates receiving under its collaboration with Sanofi, and RIBX's existing cash and cash equivalents, together with interest thereon, will be sufficient to fund the continued development of delafloxacin and RX-04 through the following events:

  • Receipt of top-line data from RIBX's initial Phase 3 clinical trial of the IV dosage form of delafloxacin for the treatment of ABSSSI; and
  • Identification of a clinical candidate from the RX-04 program and submission of an Investigational New Drug, or IND, application.

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