IPO Launch: Freeline Therapeutics Proposes $125 Million IPO

IPOStreet

According to an amended registration statement, Freeline Therapeutics (FRLN) intends to raise $125 million from the selling of ADSs that represent underlying common stock at an IPO.

The company is developing a pipeline of candidates for the treatment of hemophilia, Gaucher disease, and Fabry disease.

FRLN has produced promising trial results to-date and an IPO valuation within range.

Hertfordshire, UK-based Freeline was founded to develop its AAV-based gene therapy technologies for the treatment of various lysosomal storage disorders, Fabry disease and Gaucher disease.

Management is headed by Theresa Heggie, Chief Executive Officer, who has been with the company since June 2020 and previously worked as SVP, Head of CEMEA at Alnylam Pharmaceuticals and held positions at Bupa Group and Shire plc.

Below is a brief summary video of the gene therapy focused on AAV:

Source: Novartis

The firm's lead candidate, FLT180a, is in Phase 1/2 trials for the treatment of severe hemophilia B, which causes abnormal clotting of blood.

To-date, the company has 'reported clinical trial results demonstrating FIX activity levels well into the clinically normal FIX activity level range of 50% to 150%.'

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

freelinepipe

Source: Company S-1 Filing

Investors in the firm have invested at least $207.6 million and include Syncona Portfolio and Novo Holdings.

The global demand for hemophilia care is projected to hit a value of $17 billion by the end of 2027, according to a market research study released by Grand View Research in 2020.

This reflects a CAGR (Compound Annual Growth Rate) projection of 5.5 per cent between 2020 and 2027.

Key elements driving this expected growth are an expected increase in bleeding disorders as well as a growing awareness of treatment options.

Furthermore, below is a chart showing the historical and future projected growth rates of hemophilia services in the U.S.: 

freelinehemomkt

The North America region contributed more than 44.4 percent of the overall market share, but the Asia Pacific region is projected to see the highest increase in patient demand by 2027.

Significant competitive vendors selling or developing treatments include:

  • BioMarin (BMRN)
  • 4D Molecular Therapeutics (DDDD)
  • Sangamo (SGMO)
  • Takeda Pharmaceuticals (TAK)
  • Spark Therapeutics
  • uniQure (QURE)

Freeline 's recent financial results are typical of a development stage biopharma in that they feature no revenue and significant R&D and G&A expenses associated with advancing its programs.

Below are the financial results of the last two calendar years for the company:

freelinepl

Source: Company registration statement

As of December 31 , 2019, the company had $73.7 million in cash and $12.4 million in total liabilities. (Interim (Unaudited)

FRLN intends to sell 7.4 million ADSs representing underlying ordinary shares at a midpoint price of $17.00 per ADS for gross proceeds of approximately $125 million, not including the sale of customary underwriter options.

No current shareholders have expressed an interest in purchasing stock at the price of the IPO. The lack of this common type of support by current investors is a negative signal.

Assuming a successful IPO at the midpoint of the expected price range, the enterprise value at IPO for the company will be around $500 million.

With the exception of the effects of underwriter options and private placement shares or limited stock, if any, the float ratio to outstanding shares will be around 21.78%.

The firm plans to use the net proceeds as follows, according to the company's most recent regulatory filing:

to fund further clinical and CMC development of our product candidates, including the completion of our ongoing Phase 1/2 B-AMAZE clinical trial of our lead product candidate, FLT180a, and completion of our ongoing Phase 1/2 MARVEL-1 clinical trial of FLT190, as well as the development of our preclinical programs; and

the balance for other general corporate purposes, including general and administrative expenses and working capital.

The presentation of the company roadshow by Management is not available.

Listed underwriters of the IPO are J.P. Morgan, Morgan Stanley, Wedbush PacGrow and Evercore ISI.

Commentary

FRLN seeks an above-average size of IPO transaction to advance its hemophilia, Gaucher disease and Fabry disease care pipeline.

The firm expects to complete its existing Phase 1/2 trials for its lead candidate, and to enter pivotal Phase 2b/3a trials.

With the IPO funds combined with its existing resources, FRLN appears to be well capitalized in its pipeline activities.

Throughout its target programs, management expects some commonalities like dose response, clinical experience, manufacturing process, and similar capsids and promoters.

The market demand for hemophilia care is large and is expected to rise at a modest pace, reaching a value of $17 billion by the end of 2027.

Management has not revealed any partnerships of cooperation with major pharmaceutical firms, and at this point they are following a 'go it alone' strategy.

J.P. Morgan is the lead left underwriter and the company-led IPOs have generated an average return of 62.5 percent since their IPO over the last 12-month period. This is a top level performance during the period for all major underwriters.

As for valuation, management is asking IPO investors to pay an enterprise value at the top end of the typical IPO range of biopharmaceuticals, so the IPO is not cheap.

Considering the company's encouraging trial results and within-range IPO valuation, my view on the IPO is a BUY at up to $17.00 per ADS, for life science investors with an 18- to 36-month hold time frame.

Expected IPO Pricing Date: August 6, 2020.

Glossary Of Terms

(I have no position in any stocks mentioned as of the article date, no plans to initiate any positions within the next 48 hours, and no business relationship with any company whose stock is mentioned in this article. IPO stocks can be very volatile in the days immediately after an IPO. Information provided is for educational purposes only, may be in error, incomplete or out of date, and does not constitute financial, legal, or investment advice.)

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