IPO Launch: Orphazyme A/S Finalizes Terms For $100 Million U.S. IPO
Orphazyme A/S (ORPH) has filed to raise $100 million in an IPO of its ADSs representing underlying ordinary shares, according to an F-1 registration statement.
The firm is a late stage developer of treatments for lysosomal storage and neuromuscular diseases.
Copenhagen, Denmark-based Orphazyme was founded to advance a pipeline that features the amplification of heat shock proteins, 'which are molecular chaperones that are critical in the natural cellular response to stress, protein misfolding, aggregation and lysosomal dysfunction.’
Management is headed by Chief Executive Officer Ms. Kim Stratton, who has been with the firm since October 2019 and was previously Head of International Commercial for ex-U.S. Business for Speciality and Rare Diseases at Shire.
Below is a brief overview video of Niemann-Pick disease Type C:
The firm's compound, arimoclomol, is being tested for a range of lysosomal and neuromuscular disorders and management expects the FDA to complete its review of the firm's Phase 3 results for the treatment of Niemann-Pick disease Type C by March 17, 2021.
Below is the current status of the company’s drug development pipeline:
Source: Company S-1 Filing
Investors in the firm include Orpha Pooling B.V., Sunstone Life Science Ventures, Cooperative Aescap Venture, and entities affiliated with Consonance Capman.
According to a 2019 market research report by Grand View Research, while the firm's lead candidate treats Niemann-Pick disease Type C, the larger global market is likely for amyotrophic lateral sclerosis treatment, which is forecast to reach $886 million by 2026.
North America accounted for the largest market share in 2018 and will likely continue to dominate the ALS demand in the near future.
The Asia Pacific region is expected to grow at the fastest rate in the coming years among all global regions.
There are only two medications approved to treat ALS in the U.S., Rilutek and Radicava. However, another drug, Nuedexta, is also used for ALS conditions.
Major competitive vendors that provide or are developing treatments include:
For Niemann-Pick disease:
- Sanofi (SNY)
- Alexion Pharmaceuticals (ALXN)
- CTD Holdings
- Actelion Pharmaceuticals (ALIOF)
- Merck (MRK)
- Okklo Life Sciences
- Mitsubishi Tanabe Pharma
- Otsuka Pharmaceutical (OSUKF)
- BrainStorm Therapeutics (BCLI)
- Biogen (BIIB)
- AB Science (AMSCF)
- Biohaven Pharmaceutical (BHVN)
- Sun Pharmaceutical (SMPQY)
- Ionis Pharmaceuticals (IONS)
Orphazyme’s recent financial results are typical of a development stage biopharma in that they feature no revenue and significant R&D and G&A costs associated with advancing its programs.
Below are the company’s financial results for the past two and ½ years (Audited IFRS for full years):
Source: Company registration statement
As of June 30, 2020, the company had $92 million in cash and $27.2 million in total liabilities. (Unaudited, interim)
Orphazyme intends to raise $100 million in gross proceeds from an IPO of its ADSs representing underlying ordinary shares.
No existing shareholders have indicated an interest to purchase shares at the IPO price, a common feature of life science IPOs.
Assuming a successful IPO, the company’s enterprise value at IPO would approximate $368.9 million, excluding the effects of underwriter over-allotment options.
Management says it will use the net proceeds from the IPO as follows:
approximately $35 million to $40 million to continue the regulatory approval process for and fund the commercial launch, if approved, of arimoclomol for the treatment of NPC;
approximately $10 million to $15 million to advance the clinical development of arimoclomol for the treatment of ALS;
approximately $8 million to $12 million to advance the clinical development of arimoclomol for the treatment of sIBM;
approximately $2 million to $3 million to advance the clinical development of arimoclomol for the treatment of neurological Gaucher disease; and
the remaining amounts for working capital and general corporate purposes, including to fund the development of our next generation of HSP amplifiers.
Management’s presentation of the company roadshow is available here.
Listed bookrunners of the IPO are BofA Securities, Cowen, Guggenheim Securities and Danske Markets.
Orphazyme is seeking U.S. public investment capital to advance its programs for its only compound, arimoclomol.
The individual market opportunities for the four targeted diseases are not large, but taken together represent a significant opportunity for the firm.
Management says it believed arimoclomol could ‘benefit up to 100,000 patients in the United States and Europe[...] we believe that arimoclomol’s unique mechanism of action has potential therapeutic application across a broader range of lysosomal and neurodegenerative orphan diseases, several of which address significantly larger patient populations and target markets than those we are currently pursuing in our clinical development programs.’
The firm currently has no disclosed research or pharma collaborations.
BofA Securities is the lead left underwriter and IPOs led by the firm over the last 12-month period have generated an average return of 72.9% since their IPO. This is a top-tier performance for all major underwriters during the period.
As to valuation, the IPO is priced within the typical range for clinical stage biopharma IPOs.
The case for ORPH is that management believes it has the basis for targeting far larger markets with its approach.
The problem is that it will take significant time to do so, time likely measured in years rather than months.
While a very long-term hold investor may favor ORPH, my bias is to the shorter or medium term time frame for typical investors.
Given the long-term nature of the firm’s opportunities, my opinion on the IPO is NEUTRAL.
Expected IPO Pricing Date: September 24, 2020.
(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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