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IPO Preview: Nexvet Biopharma Plc


Based in Dublin, Ireland, Nexvet Biopharma plc (Pending:NVET) scheduled a $58 million IPO on Nasdaq with a market capitalization of $160 million at a price range midpoint of $14.50 for Thursday, Feb. 5, 2015.

The full IPO calendar is available at IPOpremium

SEC Documents

Manager, Joint-managers: BofA Merrill Lynch, Cowen
Co-managers: Piper Jaffray, JMP Securities

End of lockup (180 days): Tuesday, August 4, 2015
End of 25-day quiet period: Monday, March 2, 2015

Summary
NVET is a clinical stage biopharmaceutical company focused on transforming the therapeutic market for companion animals by developing and commercializing novel, species-specific biologics based on human biologics.

As a class, biologics, which include mAbs and fusion proteins, have transformed human medicine in recent decades and represent some of the top-selling therapies on the market today.

Veterinary care is one of the fastest growing industries in the overall U.S. companion animal market and is estimated to reach $15.3 billion in 2014.

Valuation
Glossary

Accumulated deficit ($mm)..-$14
Per share dilution..-$7.54
———————————————
Valuation RatiosMrkt Cap ($mm)Price/SlsPrice/ErngsPrice/BkVluePrice/TanBV% offered in IPO
annualizing Sept 9 mos
Nexvet Biopharma plc NVET)$160n/a-22.62.12.136%

Conclusion
Neutral

Animal biologics

Insiders may purchase $12mm, 20.6%

Safety & efficacy data expected end of ’15 and ’16

Price-to-bk 2.1, relatively low

P/E of -22.6 indicates relatively low current cash burn rate relative to market cap

To put the conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced above.

Business
NVET is a clinical-stage biopharmaceutical company focused on transforming the therapeutic market for companion animals by developing and commercializing novel, species-specific biologics based on human biologics.

As a class, biologics, which include mAbs and fusion proteins, have transformed human medicine in recent decades and represent some of the top-selling therapies on the market today.

NVET is targeting the companion animal therapeutics segment of the veterinary care industry.

NVET estimates that in 2013, consumers spent $2.3 billion on companion animal therapeutics. This segment is currently dominated by small molecule drugs.

Market
Veterinary care is one of the fastest growing industries in the overall U.S. companion animal market and is estimated to reach $15.3 billion in 2014.

The size and growth of this market reflects many factors, including higher rates of companion animal ownership, increased availability and improved quality of veterinary care and the increasingly important role of companion animals in our lives, who are often considered members of our families.

NVET believes these factors, together with the introduction of its product candidates with their favorable safety and compliance profiles, will increase overall demand for companion animal therapeutics.

Two of NVET’s lead product candidates, NV-01 and NV-02, are mAbs that are designed to neutralize disease-causing targets in the body. mAbs belong to a class of medicines called biologics, which have transformed human medicine in recent decades.

They have had a significant impact in the treatment of a number of human conditions, including various cancers, inflammatory diseases and cardiovascular and neurological diseases.

As a class, mAbs have an improved safety and efficacy profile in humans over small molecule drugs.

Although a few have received conditional licensure in the United States, there are currently no mAbs for the management of pain or inflammation in companion animals approved for marketing in the United States or the EU.

Proprietary platform
NVET’s proprietary PETization platform is an algorithmic approach that enables NVET to rapidly create mAbs that are designed to be recognized as “self” or “native” by an animal’s immune system, a property NVET refers to as “100% species-specificity.”

PETization is also designed to build upon the safety and efficacy data from clinically tested human therapies to create new therapies for companion animals, thereby reducing clinical risk and development cost.

Two products
NVET’s first product candidate, NV-01, is a mAb that is a nerve growth factor, or NGF, inhibitor for the control of pain associated with osteoarthritis in dogs.

NVET’s second product candidate, NV-02, is a mAb that is an NGF inhibitor for the control of pain associated with degenerative joint disease in cats.

Data expected
NVET expects data from its pivotal safety and efficacy studies for NV-01 by the end of 2015 and for NV-02 in 2016.

NVET’s third product candidate, NV-08, is a fusion protein that is a tumor necrosis factor, or TNF, inhibitor for the treatment of chronic inflammatory diseases, including atopic dermatitis, in dogs.

If its proof-of-concept safety and efficacy studies for NV-08 are successful, NVET will progress this product into formal development.

Growth plan
Using PETization, NVET is seeking to advance one new product candidate into development per year, commencing in the second half of 2015.

Intellectual property
NVET’s patent estate includes patent applications with claims directed to its PETization platform, its NV-01, NV-02 and NV-08 product candidate compositions, several of its pipeline product candidate compositions that are currently under development or are under consideration for future development and therapeutic uses of such product candidate compositions.

As of September 30, 2014, NVET’s patent estate included on a worldwide basis nine separate patent families with a total of approximately 99 pending patent applications, including approximately 90 pending foreign patent applications and nine pending patent applications in the United States.

Six of these patent families are directed to compositions and methods related to NVET’s mAb products currently in research or development.

These products have a novel combination of recipient compatibility and high affinity as a result of NVET’s innovative design process whereby the donor antibody is modified so that no amino acid in its variable or framework regions is foreign to the intended host in any position.

As a result, the therapeutic antibody is more likely to be seen as “self” or “native” and will therefore be less likely to induce a neutralizing antibody response.

This in turn will permit repeat dosing without reduction in efficacy or product half-life. Patents from these applications, if issued, are expected to expire between 2032 and 2035.

Competition
NVET believes its main competitors are animal health companies that are developing products for use in companion animals, such as Aratana Therapeutics, Inc. (NASDAQ:PETX), Kindred Biosciences, Inc. (NASDAQ:KIN) and Zoetis, Inc. (NYSE:ZTS)

In addition, there are a number of large biopharmaceutical companies with animal health divisions, such as Bayer AG (OTCPK:BAYRY), Boehringer Ingelheim GmbH, Eli Lilly and Company (NYSE:LLY) (Elanco division), Merck & Co., Inc. (NYSE:MRK), Sanofi S.A. (NYSE:SNY) (Merial division), and Novartis AG (NYSE:NVS). If approved, NVET expects NV-01 and NV-02 will face competition from Deramaxx, marketed by Novartis; Metacam, marketed by Boehringer Ingelheim; Previcox, marketed by Merial; and Rimadyl, marketed by Zoetis, as well as from generic Meloxicam and Carprofen and other pain treating products.

NVET believes that Kindred and Aratana are developing, and that other companies may develop, similar profile products as well.

In addition, private label products may compete with NVET’s lead product candidates. If companion animal therapeutics’ customers increase their use of new or existing private label products, NVET’s operating results and financial condition could be adversely affected.

5% shareholders pre-IPO

David Gearing, Ph.D. 5.4%

Rajiv Patel 31.5%

Adage Capital Partners, LP 11.2%

Akubra Investors, LLC 10.5%

AustralianSuper Pty Ltd ATF AustralianSuper 6.3%

Bushranger Funding, LLC 11.4%

Foresite Capital Fund II, LP 9.9%

Irrus Investments Nominee Limited 9.1%

One Funds Management Limited ATF Asia Pacific Healthcare Fund II 11.9%

Ute Holdings, LLC 11.5%

Dividends
No dividends are planned.

Use of proceeds
NVET expects to receive $51 million from its IPO and use it for the following:

$4.0 million to complete its pivotal safety and efficacy studies for NV-01, its lead product candidate for the control of pain associated with osteoarthritis in dogs, plus an additional $9.0 million for chemistry, manufacturing and controls studies ($5.0 million), stability studies ($2.0 million), and regulatory compliance and other miscellaneous costs ($2.0 million); and

$13.0 to $15.0 million to complete the development and manufacturing scale-up of each of NV-02, its lead product candidate for the control of pain associated with degenerative joint disease in cats, and NV-08, its lead product candidate for the treatment of chronic inflammatory diseases, including atopic dermatitis, in dogs, which includes for each lead product candidate pivotal safety and efficacy studies ($4.0 million), chemistry, manufacturing and controls studies ($4.0 to $5.0 million), stability studies ($2.0 million), costs for proof-of-concept related activities ($1.0 million) and regulatory compliance and other miscellaneous costs ($2.0 to $3.0 million).