Braeburn Pharmaceuticals Proposes $150 Million IPO Terms

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Summary

Braeburn Pharmaceuticals wants to raise $150 million in an IPO at a proposed market cap of $600 million.

The company is commercializing an implantable delivery device for treatment of opioid addiction.

A $600 million market cap is more than double typical life science companies with no revenue history.

While I'm optimistic about the company's prospects, I am neutral on the IPO due to its high valuation.

Quick Take

Opioid treatment delivery system developer Braeburn Pharmaceuticals (BBRX) has updated its IPO terms and intends to sell 7.7 million shares at a midpoint price of $19.50 per share, according to its most recent S-1 filing.

The company has proposed at post-IPO market cap of $600 million, which is more than double that of other life science companies going public with no revenue history.

BBRX's differentiated technology is limited to the implantable device delivery system, not the generic drug used, so my opinion on the IPO is NEUTRAL due to its high valuation.

Company Recap

Incorporated in 2012, New Jersey-based Braeburn Pharmaceuticals is commercializing an improved delivery system for buprenorphine, a long-term treatment for opioid addiction.

The company in-licensed the system from Titan Pharmaceuticals (NASDAQ:TTNP) and has the exclusive US and Canadian rights to Probuphine, a three-device implant that provides a six-month dose of buprenorphine.

Existing treatment systems require either injections which can be inconvenient and result in less patient compliance or sublingual (under the tongue) tablets or films that addicts can still abuse.

IPO Details

Braeburn is proposing to value itself at $600 million market cap post-IPO, based on a midpoint share price of $19.50 and 30.6 million shares outstanding.

The company says it intends to use the net proceeds to commercialize its lead product Probuphine and to advance its product candidates in clinical development.

Sole shareholder Apple Tree Partners intends to purchase $40 million of common stock at the IPO price in a concurrent private placement. This is a positive signal to the market from the company's sole shareholder.

Target date for the IPO is unknown at this time.

Commentary

In my original analysis of the company and its IPO prospects, Braeburn Pharmaceuticals Looks to Raise $150 Million IPO, I detailed the large market size, suboptimal existing delivery systems and the company's strategy of developing variants of its implantable device and injection system in order to expand its potential target patient population.

The U.S. is in the midst of an opioid epidemic, with an estimated 78 persons dying per day in 2014 from opioid-related causes, according to a 2016 U.S HHS report.

Braeburn has done an excellent job in training over 2,400 healthcare providers to prescribe an implant the device as well as over 70 payors who have indicated that they intend to cover the device.

However, the company has virtually no history of revenues, since it has only just begun to sell its lead product in the US and Canada.

Life science companies going public with no revenue history typically do not command valuations above $300 million, so the $600 million valuation is extremely high.

Additionally, the active ingredient in the device is generic buprenorphine, so the company's main differentiating asset to-date is the implantable device, not the drug itself.

Competitors also provide treatments via sublingual tablets and films, which while they may be subject to higher abuse by patients, still represent valid treatments in the market and will no doubt continue to receive investment to improve their efficacy and safety profile.

Accordingly, due to BBRX's $600 million proposed valuation, which is too high given the company's lack of revenue history, competitive threats and device-only differentiation, my opinion on the IPO is neutral.

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