IPO Launch: Scopus BioPharma Readies $6 Million IPO
Scopus BioPharma (SCPS) aims to raise $6 million in an IPO of its common stock, according to an 1-A registration statement.
The company is advancing treatments for lymphoma and systemic sclerosis conditions.
SCPS is thinly capitalized and is still at pre-clinical stage so is very early and ultra-high-risk.
New York, NY-based Scopus was founded to license and develop a STAT3 inhibitor gene therapy for various cancers including B-cell lymphoma.
Scopus is also advancing a cannabinoid-1 candidate for the treatment of fibrosis of the skin, lung, kidney, heart and gastrointestinal tract, also known as systemic sclerosis.
Management is led by Co-Chairman Mr. Paul Hopper, who was previously Executive Chairman of Bioscience Oncology Pty and has played senior roles at several private and publicly-traded biopharma firms in the U.S. and Australia.
Below is a brief overview video of non-Hodgkin lymphoma:
The firm's lead candidate is expected to begin Phase 1 safety trials in Q1 2021 in conjunction with the City of Hope.
Management says that 'in pre-clinical testing at City of Hope, our STAT3 inhibitor has successfully reduced growth and metastasis of various pre-clinical tumor models, including melanoma, and colon and bladder cancers, as well as leukemia and lymphoma.'
Below is the firm's current pipeline status:
Source: Company Website
Investors in the firm have invested at least $3.6 million and include HCFP/Capital Partners, Moreglade Pty. and Morris Laster, M.D.
According to a 2019 market research report by Grand View Research, the global market for lymphoma treatment was an estimated $11.7 billion in 2018.
This represents a forecast CAGR (Compound Annual Growth Rate) of CAGR of 9.5% from 2019 to 2026.
If that growth rate is achieved, the total global market size would exceed $24 billion at the end of the analysis period.
Key elements driving this expected growth are an expected increase in application of premium-priced immune checkpoint inhibitor products, such as Keytruda and Opdivo and an increase in the number of lymphoma and Hodgkin and non-hodgkin lymphoma cases.
Also, the U.S. lymphoma market's historical and projected future growth prospects are shown in the chart below:
Major competitive vendors that provide or are developing treatments include:
- Amgen (AMGN)
- Merck (MRK)
- Bristol-Myers Squibb (BMY)
- Celgene (GENE)
- Seattle Genetics (SGEN)
- Takeda Pharmaceutical Co. (TAK)
- Johnson & Johnson (JNJ)
- Eli Lilly and Company (LLY)
- Abbott Laboratories (ABT)
Scopus’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 its drug development efforts.
Below are the company’s financial results for the past two years (Audited PCAOB for full years):
Source: Company registration statement
As of December 31, 2019, the company had $36,747 in cash and $854,541 in total liabilities. (Unaudited, interim)
Scopus intends to raise $5.5 million in gross proceeds from an IPO of its common stock.
No existing shareholders have indicated an interest to purchase shares at the IPO price. This is a common feature for life science IPOs, so the absence of it is a negative signal.
Assuming a successful IPO, the company’s enterprise value at IPO would approximate $82.3 million, excluding the effects of underwriter over-allotment options.
Management says it will use the net proceeds from the IPO as follows:
Conducting pre-clinical and clinical development for our current and future drug candidates;
Funding our existing and sponsoring new research programs;
Prosecuting patent applications and protecting our intellectual property rights; and
Working capital and general corporate purposes.
Management’s presentation of the company roadshow is not available.
The sole listed bookrunner of the IPO is The Benchmark Company.
Scopus is seeking public capital market investment to advance its lead drug candidate into Phase 1 safety trials expected in Q1 2021.
The market opportunity for treating various forms of lymphoma is large and expected to grow at a moderate rate for the near future.
The firm has a research collaboration with the City of Hope and Bioscience Oncology for which it has paid both cash or shares of common stock and warrants.
Scopus is obligated to pay further consideration in cash and common stock, ‘in some cases upon satisfaction of certain milestones.’
The Benchmark Company is the sole underwriter and IPOs led by the firm over the last 12-month period have generated an average return of negative (9.5%) since their IPO. This is a bottom-tier performance for all major underwriters during the period.
As to valuation, management is asking IPO investors to pay a proposed enterprise value of $82.3 million, which is abnormally low for a typical biopharma IPO.
The company is thinly capitalized and is still at pre-clinical stage so is very early and ultra-high-risk.
The IPO may be more suited to institutional investors with a long-term hold time horizon.
My opinion on the IPO is to AVOID it.
Expected IPO Pricing Date: To be announced.
(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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