NLS Pharmaceutics Seeks $40 Million U.S. IPO

Summary

• NLS Pharmaceutics has filed to raise development funding on U.S. capital markets.
• The firm is advancing a pipeline of drug candidates for the treatment of narcolepsy and ADHD.
• NLSP plans to begin pivotal trials for its narcolepsy treatment in late 2020.
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Quick Take

NLS Pharmaceutics (NASDAQ:NLSP) has filed to raise $40.25 million in an IPO of its common stock, according to an F-1 registration statement.

The company is advancing a pipeline of drug candidates for the treatment of various central nervous system disorders.

NLSP expects to begin pivotal trials for its lead candidate in late 2020.

When we learn more about the IPO’s details, I’ll provide a final opinion.

Company & Technology

Stans, Switzerland-based NLS was founded to develop treatments for central nervous system disorders.The firm's current area of focus is developing single molecules for the treatment of rare hypersomnia (excessive or uncontrollable daytime sleepiness, narcolepsy) and attention deficit hyperactivity disorder, or ADHD.

Management is headed by Chief Executive Officer Mr. Alexander Zwyer, who has been with the firm since 2015 and was previously at Viforpharma AG.

Below is a brief overview video of narcolepsy:

Source: Osmosis

The firm's primary candidates, Quilience for narcolepsy and Nolazol for ADHD, use a molecule Mazindol in a controlled release formulation.Mazindol has been used for the treatment of obesity and off-label for narcolepsy.NLSP intends to begin pivotal trials for Quilience in Q4 2020 and in Q4 2021 for Nolazol.

Investors in the firm have invested at least $20.5 million and include Magnetic Rock Investment and various individuals.

Market & Competition

According to a 2019 market research report by Allied Market Research, the market for narcolepsy treatment was $2.4 billion in 2018 and is forecast to reach $5.4 billion by 2026.

This represents a forecast CAGR (Compound Annual Growth Rate) of 10.3% from 2019 to 2026.

Key elements driving this expected growth are The narcolepsy drug market is segmented into the following parts:

• Central nervous system stimulants (NLS’s candidates are in this category)

• Tricyclic antidepressants

• Sodium oxybate

• Selective serotonin reuptake inhibitors [SSRIs]

• Others

North America accounts for the most demand is expected to continue to due to increasing numbers of narcolepsy and other sleep disorder cases.However, the Asia Pacific region is expected to grow at the highest rate of growth through 2026.

Major competitive vendors that provide or are developing treatments include:

• Ligand Pharmaceuticals (LGND)

• Novartis (NVS)

• Harmony Biosciences

• Takeda Pharmaceuticals (TAK)

• Addrenex Pharmaceuticals

• Shire (SHPG)

• Teva Pharmaceutical Industries (TEVA)

• Arena Pharmaceuticals (ARNA)

• Jazz Pharmaceuticals (JAZZ)

• Bioprojet

• Graymark Healthcare

Financial Status

NLS’s recent financial results are

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 $1.2 million in cash and $5.6 million in total liabilities. (Unaudited, interim)

IPO Details

NLS intends to raise $40.25 million in gross proceeds from an IPO of its common stock, although the final amount may be different.

No existing shareholders have indicated an interest to purchase shares at the IPO price. It is typical to see at least some investor ‘support’ for life science firm IPOs, so I would expect to see this element in a future filing.

Management says it will use the net proceeds from the IPO as follows:

to further develop Quilience (which may also benefit, in part, our development, if any, of Nolazol) and to conduct pivotal trials for Quilience;payment to our Interim Chief Business Officer pursuant to the terms of his consulting agreement with us (to receive 1% of the net proceeds actually received by us in an initial public offering) (also referred to herein as the Transaction Fee); andthe remainder, if any, for working capital and general corporate purposes.

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

Listed bookrunners of the IPO are the Maxim Group and Arcadia Securities.

Commentary

NLS is seeking U.S. public market funding for further development of its repurposing of an existing approved drug for the treatment of narcolepsy and ADHD.

I suppose the size of the U.S. market for these drug treatments makes going public in the U.S. a logical choice for a Swiss company.

Management expects to begin pivotal trials for its lead candidate in late 2020, so we probably won’t know initial results from that trial until well into 2021 or perhaps not until 2022.

The market opportunity for treating sleep disorders and ADHD is large and expected to grow at a reasonably strong CAGR and aging world populations encounter greater sleep disorders.

NLSP has disclosed no commercial collaborations. I like to see at least one collaboration, but given the preexisting approval status of the drug for a different condition, perhaps this isn’t an important consideration in this case.

When we learn more information about pricing and valuation expectations from management, I’ll provide an update.

Expected IPO Pricing Date: To be announced.

Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.

Analyst’s 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.

Comments

[az3101]

The company announced an outlicensing deal with Eurofarma for Latin-America in 2019.