Forma Therapeutics Launches Ambitious IPO Plan

Summary

• Forma Therapeutics has filed to raise $150 million in an IPO, although the final figure may differ.
• The firm is developing treatments for sickle cell disease and other conditions.
• FMTX has received significant milestone revenue from its major pharma firm partnerships.
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Quick Take

Forma Therapeutics (FMTX) has filed to raise $150 million in an IPO of its voting common stock, according to an S-1 registration statement.

The firm is developing treatment candidates for patients with hematological (blood) diseases and cancers.

FMTX is a mid-stage biopharma that has earned significant milestone revenue from its major pharma partnerships.

I'll provide a final opinion when we learn more about the IPO from management.

Company & Technology

Watertown, Massachusetts-based Forma was founded to advance a pipeline of drug treatments, the lead candidate of which seeks to treat patients with sickle cell disease [SCD].

Management is headed by president and CEO Frank Lee, who has been with the firm since 2019 and was previously in varying senior roles at Genentech.

Below is a brief overview video of sickle cell disease:

Source: Novartis

The company's lead candidate is FT-4202, for the treatment of sickle cell disease. The drug seeks to activate pyruvate kinase-R to improve RBC metabolism resulting in increased hemoglobin levels.

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

Source: Company S-1 Filing

Investors in the firm have invested at least $142 million and include Novartis Bioventures (NVS), Biomedical Sciences Investment Fund, Lilly Ventures (LLY), Baker Brothers Advisors and Cormorant Global.

Market & Competition

According to a 2018 market research report by Grand View Research, the market for sickle cell disease treatment is expected to reach $5.5 billion by 2023.

This represents a forecast CAGR (Compound Annual Growth Rate) of 14.3% from 2019 to 2023.

Key elements driving this expected growth are a growing patient pool size leading to increased demand and development of potential new drugs in late stages, including voxelotor, crizanlizumab, Altemia and rivipansel.

Major competitive vendors that provide or are developing treatments include:

• Emmaus Medical (OTCQB:EMMA)

• Global Blood Therapeutics (GBT)

• bluebird bio (BLUE)

• Pfizer (PFE)

• Novartis (NVS)

• EpiDestiny

• Novo Nordisk (NVO)

• Syros Pharmaceuticals (SYRS)

• Others

Financial Status

Forma's recent financial results are atypical of a clinical stage biopharma in that they feature significant historical collaboration revenue along with significant R&D and G&A expenses associated with advancing its pipeline.

Below are the company's financial results for the past two and ¼ years (Audited PCAOB for full years):

Source: Company registration statement

As of March 31, 2020, the company had $110.3 million in cash and $23.6 million in total liabilities. (Unaudited, interim)

IPO Details

Forma intends to raise $150 million in gross proceeds from an IPO of its voting common stock, although the final amount may be different.

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' in a future filing.

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

for the development of FT-4202 in SCD, including completion of our ongoing Phase I clinical trial and, subject to the results of our Phase I clinical trial, the initiation and conduct of our planned, global pivotal Phase II/III clinical trial through Phase III dose selection and Hb futility; for the advancement of FT-7051 in mCRPC through the dose escalation phase and into the dose expansion phase of our planned Phase I clinical trial; and the remaining proceeds for research, working capital and other general corporate purposes, including the completion of our noncore programs.

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

Listed bookrunners of the IPO are Jefferies, SVB Leerink, and Credit Suisse.

Commentary

Forma is seeking a larger than usual life science IPO transaction size to advance its programs through further development and trials.

The firm's sickle cell disease treatment candidate, FT-4202, is expected to move into Phase 2/3 trials with the IPO funds and its existing resources.

The market opportunity for treating SCD is significant and expected to grow at a high rate in the near term, partially due to late stage drugs hitting the market, so Forma will have significant competition assuming trial success.

Forma has investment relationships with major pharmaceutical firms and has outlicensed technologies to Bristol-Myers Squibb (BMY) and Boehringer Ingelheim.

The firm has received significant milestone revenues which are atypical for a biopharma at its stage of development and which is a positive signal.

When we learn more about management's pricing and valuation assumptions, I'll provide an update.

Expected IPO Pricing Date: To be announced.

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.