ORIC Pharmaceuticals (ORIC) has filed to raise $75 million in an IPO of its common stock, according to a registration statement.
The company is developing a pipeline of drug candidates for treating persons with treatment resistant prostate cancer or solid tumors.
ORIC is led by extremely capable and successful executives in the cancer life science industry.
For life science investors with a long-term time frame and who wish to bet on an experienced management team, my opinion on the IPO is a BUY at up to $15.00 per share.
ORIC is based in South San Francisco, California and was founded to develop small molecule antagonists of the glucocorticoid receptor to treat various prostate and solid tumors.
Management is led by Chief Executive Officer Mr. Jacob Chacko, M.D., who has been with the firm since May 2019 and was previously CFO at Ignyta, a precision oncology firm that was acquired by Roche Holding for $1.7 billion in 2018.
Below is a brief overview video of current treatment options for prostate cancer:
Source: Cancer Research UK
The company's lead candidate is ORIC-101, a 'nuclear hormone receptor that mediates responses to glucocorticoid hormones involved in regulating a range of cellular functions, such as metabolism, cell growth and differentiation.'
ORIC-101 promises to inhibit certain cancer cell activity and 'block pro-survival signals downstream of its activation that confer resistance to anti-androgen therapies and chemotherapies.'
Below is the status of the company’s drug development pipeline:
Source: S-1 registration statement
Investors in the firm have invested at least $177 million and include The Column Group, Topspin Capital, OrbiMed, and EcoR1.
According to a 2017 market research report by Grand View Research, the market for prostate cancer therapeutics is expected to reach $12 billion in size by 2025.
There are many drugs in various stages of development, some of which are expected to enter the market by 2025; also, some drugs are also going off patent and the market expects providers to develop generic versions quickly thereafter.
Key elements driving this expected growth are a growing incidence of prostate cancer worldwide and increasing numbers and types of treatment options along with public-private partnerships increasing awareness of symptoms and treatment options.
Major firms that provide or are developing treatments include:
- Astellas (ALPMF)
- Dendreon (DNDNQ)
ORIC’s recent financial results are typical of a development stage biopharma firm in that they feature no revenue and significant R&D and G&A expenses associated with advancing its pipeline into and through clinical trials.
Below are the company’s financial results for the past two years (Audited PCAOB):
Source: Company registration statement
As of December 31, 2019, the company had $17 million in cash and $35.6 million in total liabilities. (Unaudited, interim)
ORIC intends to sell five million shares of common stock at a midpoint price of $15.00 per share for gross proceeds of approximately $75.0 million, not including the sale of customary underwriter options.
No existing shareholders have indicated an interest to purchase shares at the IPO price. The lack of this typical investor interest is a negative signal for the IPO.
Assuming a successful IPO at the midpoint of the proposed price range, the company’s enterprise value at IPO would approximate $305 million.
Excluding effects of underwriter options and private placement shares or restricted stock, if any, the float to outstanding shares ratio will be approximately 19.02%.
Per the firm’s most recent regulatory filing, it plans to use $50 million of the net proceeds to fund development of its lead candidate, ORIC-101, $10 million for its ORIC-533 program and the remainder for general corporate purposes.
The underwriters of the IPO are J.P. Morgan, Citigroup, Jefferies and Guggenheim Securities.
ORIC is seeking a typical life science IPO funding amount of $75 million to further develop its pipeline focused on various types of solid tumors and prostate cancer that are resistant to existing treatment options.
For its lead candidate, ORIC-101, the firm is still in multiple Phase 1 safety trials and expects its next data readout in the first half of 2021 to as late as the second half of that year.
The worldwide market opportunity for the treatment of prostate cancer is large and expected to grow materially in the years ahead due to the aging of the male population worldwide. As a person ages, the immune system becomes less efficient at warding off threats to the body’s system, leading to increased cancer incidence.
The firm has no announced commercial collaborations, however it is trialling its lead candidate with Astellas Pharma’s XTANDI (enzalutamide) and Celgene’s Abraxane (nab-paclitaxel).
J.P. Morgan is the lead left underwriter and IPOs led by the firm over the last 12-month period have generated an average return of 29.5% since their IPO. This is a top-tier performance for all major underwriters during the period.
As to valuation, the IPO is priced at the lower end of a typical early stage biopharma seeking public capital, so is not unreasonably priced.
Notably, the firm has not characterized its result so far in any way, so there is no way to determine if the firm’s compounds are promising.
Management is highly qualified, with the CEO, Chief Medical Officer and SVP Clinical Development coming from Ignyta, a precision oncology biopharma firm which was acquired by Roche in early 2018 for $1.7 billion.
For life science investors with a patient hold timeframe and who wish to bet on management’s ability to identify and achieve success with the firm’s pipeline, the IPO may be worth considering, in any event no more than $15.00 per share.
Expected IPO Pricing Date: April 23, 2020.
(I have no positions 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. Information provided is for educational purposes only, may be incomplete or out of date, and does not constitute financial, legal, or investment advice.)