IPO Update: Monopar Therapeutics Proposes Terms For IPO

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About: Monopar Therapeutics (MNPR)
by: Donovan Jones
Summary

Monopar Therapeutics has filed proposed terms for its $40 million U.S. IPO.

The firm is advancing drug candidates for the treatment of cancer and related conditions.

MNPR has licensed its lead candidate which has had promising Phase 2 trial results.

The IPO appears reasonably priced so may be enticing for long-term hold life science investors.

Quick Take

Monopar Therapeutics (MNPR) intends to raise $40 million in an IPO of its common stock, per an S-1/A registration statement.

The company is developing a pipeline of treatment candidates for various cancers and related conditions.

MNPR is ready to initiate a Phase 3 trial for its lead candidate which has already produced promising results in its completed Phase 2 trial.

Company & Technology

Wilmette, Illinois-based Monopar was founded in 2014 to develop treatments for patients suffering from various cancers through the licensing and acquisition of oncology therapeutics in late preclinical and clinical development stages.

Management is headed by Co-Founder, CEO and Director Chandler D. Robinson, who previously founded Tactic Pharma where he still serves as a manager.

The firm's lead drug candidate Validive is a mucobuccal tablet [MBT] of clonidine based on the Lauriad mucoadhesive technology and designed for period use with the intent to reduce the incidence, delay the time to onset, and decrease the duration of severe oral mucositis [SOM] in patients undergoing chemoradiotherapy for oropharyngeal cancer.

SOM represents a painful inflammation and ulceration of the mucous membranes lining the oral cavity and oropharynx that occurs in response to chemoradiation.

Management claims that SOM is the most common and debilitating side-effect that the majority of patients receiving chemotherapy for oropharyngeal cancer develop.

Additionally, treatment could offer various benefits, such as reduced treatment discontinuations and overall patient survival, less mouth and throat pain and need for additional medication, decreased long-term and often permanent debilitation that arises from difficulties with swallowing, spasms in the neck and throat areas, as well as lung complications due to food aspiration.

Below is the current status of the company's drug development pipeline:

Source: Company registration statement

Market & Competition

According to a 2019 market research report by Market Study Report, the global oral mucositis market is projected to grow from $400 million in 2019 to $640 million by 2024, growing at a CAGR of 8% between 2019 and 2024.

Oral mucositis [OM] drugs are widely used for chemotherapy OM and radiotherapy OM that usually occur after 5 to 10 days of the chemotherapy process in cancer patients.

The North American region held the largest share of the market in 2017 with 47%.

Major competitors that provide or are developing treatments include:

  • 3M Healthcare (MMM)

  • GlaxoSmithKline (GSK)

  • Pfizer (PFE)

  • Colgate-Palmolive (CL)

  • Norgine

  • Bausch Health [TSE:BSH]

  • Camurus [STO:CAMX]

  • Clinigen Group [LON:CLIN]

  • Midatech Pharma [LON:MTPH]

  • Alliance Pharmaceuticals

Source: Sentieo

Financial Status

Monopar's recent financial results are typical of development stage biopharma firms in that they feature no revenue and significant R&D and G&A expenses associated with advancing its treatment candidates through clinical trials.

Below are the company's financial results (Audited PCAOB for full years):

Source: Company registration statement

As of June 30, 2019, the company had $5.1 million in cash and $468,272 in total liabilities. (Unaudited, interim)

IPO Details

MNPR intends to sell 4.44 million shares of common stock at a midpoint price of $9.00 per share for gross proceeds of approximately $40.0 million, not including the sale of customary underwriter options.

No existing shareholders have indicated an interest to purchase shares in the IPO, as of the initial filing. It is typical for life science IPOs to have at least some investor support for the IPO by purchasing some shares at the IPO price, so the absence of this element is a negative signal for prospective IPO investors.

Assuming a successful IPO at the midpoint of the proposed price range, the company's enterprise value at IPO would approximate $118.5 million.

Excluding effects of underwriter options and private placement shares or restricted stock, if any, the float to outstanding shares ratio will be approximately 32.36%.

Per the firm's most recent regulatory filing, it plans to use the net proceeds as follows:

approximately $20-25 million to advance our global Phase 3 clinical program for Validive, including building our clinical, regulatory and manufacturing team to support the program. Proceeds from this offering are intended to progress Validive past the interim results of the adaptive design clinical trial, and potentially through the initiation of the confirmatory second clinical trial for registration.

approximately $5-10 million for manufacturing and support of the GEIS-sponsored Phase 2 clinical trial for camsirubicin and for further development of MNPR-101.

the remainder for general corporate purposes.

Management's presentation of the company roadshow is not available.

The sole listed underwriter of the IPO is JonesTrading.

Commentary

Monopar is seeking public funding for its lead candidate's Phase 3 trial, which it intends to begin in Q4 2019.

Its lead candidate has been given fast track designation in the U.S. and orphan drug designation in the EU.

The market opportunity for oral mucositis is relatively small in comparison to other typical biopharma IPO candidates, which tend to pursue multi-billion-dollar market opportunities.

MNPR has licensed Validive from Onxeo, S.A., which had developed the drug through its Phase 2 clinical trial. That trial had 'demonstrated clinically meaningful efficacy signals with the 64-patient OPC population…[with a reduction of incidence of SOM of] 26.3%.'

So, the drug has produced promising Phase 2 results.

As to valuation, management is asking investors to pay an enterprise valuation of approximately $118.5 million at IPO, which is lower than typical biopharma IPOs, which have usually ranged between $200 million and $450 million at IPO.

Monopar appears to have a promising drug for a small market, although the IPO looks to be bargain-priced accordingly.

For life science investors with a hold time-frame of at least 18-24 months, the Monopar IPO looks promising and reasonably priced.

Expected IPO Pricing Date: Week of September 23, 2019.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.