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Oyster Point Pharma Files For $85 Million IPO

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About: Oyster Point Pharma (OYST), Includes: AGN, ALC, JNJ, KALA, NVS
by: Donovan Jones
Summary

Oyster Point Pharma has filed to raise $85 million in an IPO, although the final figure may differ.

The firm is advancing a pipeline of eye disease treatments.

OYST has achieved very promising results in Phase 2b trials for its lead candidate and expects top-line readout for its Phase 3 trials by mid-2020.

I'll provide an update when we learn IPO pricing and valuation information from management.

Quick Take

Oyster Point Pharma (OYST) has filed to raise gross proceeds of $85 million from a U.S. IPO, according to an S-1 registration statement.

The firm is developing treatments for ocular surface diseases.

OYST has produced very promising results in Phase 2b trials for its lead candidate for the treatment of dry eye disease.

Company & Technology

Princeton, New Jersey-based Oyster Point was founded in 2006 to develop new therapeutics for the treatment of eye diseases.

Management is headed by CEO and Director Jeffrey Nau, who has been with the firm since 2017 and was previously Vice President of Clinical and Medical Affairs at Ophthotech.

Below is a brief showcase video of the company’s technology:

Source: OIS: Ophthalmology Innovation & Investment

Oyster’s lead drug candidate OC-01 or ‘varenicline’ is a highly-selective nicotinic acetylcholine receptor [nAChR] agonist, currently in development as a nasal spray for the treatment of signs and symptoms of dry eye disease [DED].

Management says that varenicline has a novel mechanism of action where it is capable of re-establishing tear film homeostasis through the activation of the trigeminal parasympathetic pathway and stimulating the glands and cells responsible for natural tear film production.

“Human tear film is a complex mixture of more than 1,500 different proteins, including antibodies, and numerous classes of lipids and mucins that are responsible for forming the primary refracting surface of the cornea, as well as protecting and moisturizing the cornea.”

Most currently approved therapies rely primarily on anti-inflammatory mechanisms of action, a slow onset of action, and come mostly in the form of eye drops that can cause ocular burning, reduced visual acuity as well as a bad taste after application.

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

Source: Company website

Investors in Oyster include Flying L Partners, Vida Ventures, New Enterprise Associates, Versant Ventures, and Invus. Source: Crunchbase

Market & Competition

According to a 2019 market research report by Transparency Market Research, the global dry eye disease [DED] market was valued at $5 billion in 2016 and is projected to reach $7.7 billion by 2025, growing at a CAGR of 4.5% between 2017 and 2025.

The main factors driving forecast market growth are the rising prevalence of DED as well as increasing drug research and development efforts due to the nearing expiry of numerous patents.

Major competitors that provide or are developing treatments include:

  • Alcon (SWX:ALC)

  • Allergan (AGN)

  • HanAll BioPharma (KRX:009420)

  • Johnson & Johnson (JNJ)

  • Kala Pharmaceuticals (KALA)

  • Mitotech

  • Novaliq

  • Novartis (NVS)

  • Parion Sciences

Source: Sentieo

Financial Status

OYST’s recent financial results are typical of clinical stage biopharma firms in they feature no revenue and large R&D and G&A costs associated with advancing its drug targets through the trials process.

Below are the company’s financial results for the past two and ½ years (Audited PCAOB for full years):

Source: Company registration statement

As of June 30, 2019, the company had $83.4 million in cash and $3.5 million in total liabilities. (Unaudited, interim)

IPO Details

OYST intends to raise $85 million in gross proceeds from an IPO of its common stock.

No existing shareholders have indicated an interest to purchase shares at the IPO price, although I would expect to see some form of investor support as is typical for life science IPOs.

Per the firm’s latest filing, the firm plans to use the net proceeds from the IPO as follows:

to fund the development of our lead product candidate OC-01, including our current Phase 3 clinical trial and our planned Phase 1 pharmacokinetic “bridge” trial;

to fund our preparations for the commercialization of OC-01, including the initial build-out of a specialty sales organization; and

the remainder to fund development of OC-02, general research and development activities, working capital and other general corporate activities.

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

Listed underwriters of the IPO are J.P. Morgan, Cowen, and Piper Jaffray.

Commentary

OYST is seeking funding primarily for its Phase 3 trial of its lead candidate for the treatment of DED.

Notably, OYST’s treatment approach is differentiated from existing anti-inflammation methods of action.

The firm’s Phase 2b trial results show statistically significant reductions in dry eye symptoms for its primary and secondary endpoints.

Management expects topline readout, if all goes well, for its Phase 3 trial by mid-2020, nine to twelve months from now.

The market opportunity for dry eye disease treatment is reasonably large and growing at a moderate rate, with aging world populations likely contributing to the market growth trajectory over the coming years.

Management hasn’t disclosed any commercial collaborations, so in that respect the firm is ‘going it alone.’

Oyster Point has shown promising trial results and expects topline data in mid-2020, which would be the next potential known catalyst milestone post-IPO.

I’ll provide a final opinion when we learn management’s assumptions on pricing and valuation.

Expected IPO Pricing Date: To be announced.

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.