Eliem Therapeutics Aims For $81 Million U.S. IPO

Summary

• Eliem Therapeutics has filed proposed terms for an $81 million IPO.
• The firm is developing treatment candidates for various pain and other nervous system disorders.
• ELYM is pursuing large markets and has had positive Phase 1 safety results for its lead program.
• For patient life science investors, the IPO is worth consideration.
• Looking for more investing ideas like this one? Get them exclusively at IPO Edge. Learn More »

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Quick Take

Eliem Therapeutics (NASDAQ:ELYM) has filed to raise $81 million in an IPO of its common stock, according to an S-1/A registration statement.

The firm is a clinical stage biopharma developing drug candidates for treating pain, depression and other health conditions.

Given a reasonable valuation at IPO, a large market opportunity, positive safety trial results and topline Phase 2a trial results expected in the first half of 2022, for life science investors with a patient hold time frame, the IPO is worth a close look.

Company & Technology

Redmond, Washington-based Eliem was founded to acquire and develop treatments for certain types of pain, depressive disorders, seizures and related conditions.

Management is headed by Chief Executive Officer Robert Azelby, who has been with the firm since October 2020 and was previously CEO of Alder BioPharmaceuticals until its acquisition by H. Lundbeck.

Below is a brief overview video of diabetic neuropathy:

(Source)

The firm acquired its lead candidate, ETX-810, from Carnot, for treatment of diabetic neuropathic pain and lumbosacral radicular pain (sciatica).

The drug is in Phase 2a trials and management expects top-line data to be available in the first half of 2022.

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

(Source)

Investors in the firm have invested at least $93 million in equity investment and include RA Capital Management, LifeArc, AI and ICG Life Sciences.

Market & Competition

According to a 2019 market research report by Fortune Business insights, the global market for diabetic neuropathy treatment was an estimated $3.61 billion in 2018 and is forecast to reach $7.1 billion by 2026.

This represents a forecast CAGR (Compound Annual Growth Rate) of 8.9% from 2019 to 2026.

Key elements driving this expected growth are an increase in the prevalence of diabetes and related neuropathy incidence.

Also, the American Diabetes Association estimates that there were 171 million diabetic globally in 2000 and that number will increase to 366 million by 2030.

Major competitive vendors that provide or are developing related treatments include:

• Marinus Pharmaceuticals (MRNS)
• Cerevel Therapeutics (CERE)
• Janssen Pharmaceuticals (JNJ)
• Xenon Pharmaceuticals (XENE)/Neurocrine Biosciences (NBIX)
• Axsome Therapeutics (AXSM)
• COMPASS Pathways (CMPS)
• Others

Financial Status

Eliem's recent financial results are typical of a clinical stage biopharma in that they feature significant R&D and G&A expenses associated with its pipeline advancement efforts.

Below are the company's financial results for the past two calendar years:

(Source)

As of March 31, 2021, the company had $47.9 million in cash and $4.1 million in total liabilities.

IPO Details

Eliem intends to raise $81 million in gross proceeds from an IPO of its common stock, offering 4.5 million shares at a proposed midpoint price of $18.00 per share.

No existing shareholders have indicated an interest to purchase shares at the IPO price.

Assuming a successful IPO, the company's enterprise value at IPO (ex. underwriter options) would approximate $242 million, excluding the effects of underwriter over-allotment options.

Excluding effects of underwriter options and private placement shares or restricted stock, if any, the float to outstanding shares ratio will be approximately 19.18%.

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

Approximately $80.0 million to fund the development of ETX-810, including through Phase 2b dose-range finding studies;

approximately $70.0 million to fund the development of our ETX-155, including through completion of Phase 2a studies in MDD and PMD and completion of a Phase 1b proof of concept study in photosensitive epilepsy, as well as initiation of a Phase 2 focal onset seizure study;

approximately $10.0 million to fund the research and development of our preclinical pipeline, including new product candidates; and

the remainder to fund working capital and other general corporate activities.

We expect that our existing cash, together with the net proceeds from this offering, will be sufficient to fund our operations through late 2023.

(Source)

Management's presentation of the company roadshow is available here.

Listed bookrunners of the IPO are SVB Leerink, Evercore ISI, Stifel and Guggenheim Securities.

Commentary

Eliem is seeking public investment primarily to fund its two leading drug programs through continued clinical trials.

The firm's lead candidate, ETX-810, is being tested to treat various types of widely prevalent pain conditions.

The drug is in Phase 2a trials and management expects top-line data to be available in the first half of 2022.

The market opportunity for treating diabetic neuropathy and related conditions is large and expected to grow relatively quickly in the coming years as diabetes incidence widens due to an increasingly elderly global population.

Management has disclosed no major pharma collaboration agreements.

The company's investor syndicate includes RA Capital, a well-known institutional venture capital firm investor.

SVB Leerink is the lead left underwriter and IPOs led by the firm over the last 12-month period have generated an average return of negative (30.7%) since their IPO. This is a bottom-tier performance for all major underwriters during the period.

As for valuation, management is expecting an Enterprise Value of $242 million, which is at the low end of the typical range for clinical stage biopharma firms at IPO.

Given a reasonable valuation at IPO, a large market opportunity, positive safety trial results and top-line Phase 2a trial results expected in the first half of 2022, for life science investors with a patient hold time frame, the IPO is worth a close look.

Expected IPO Pricing Date: August 5, 2021

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such 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.

Investing in IPOs is an inherently volatile and opaque endeavor. My research is focused on identifying quality IPO companies at a reasonable price, but I’m wrong sometimes. I analyze fundamental company performance and my conclusions may not be relevant for first-day or early IPO trading activity, which can be highly volatile and unrelated to company fundamentals. This report is intended for educational purposes only and is not financial, legal or investment advice.