IPO Report: Aclaris Therapeutics (ACRS)

Francis Gaskins |

Aclaris Therapeutics (ACRS) is a clinical-stage specialty pharmaceutical company focused on identifying, developing and commercializing innovative and differentiated topical drugs to address significant unmet needs in dermatology. It is based in Malvern, PA.

Six other companies are scheduled for the week of Oct. 5. The full IPO calendar is available at IPO Premium.

SEC Documents

Manager, Joint-managers: Jefferies, Citigroup
Co-managers: William Blair

End of lockup (180 days): Monday, April 4, 2016
End of 10-day quiet period: Saturday, October 17, 2015

ACRS scheduled a $75 million IPO with a market capitalization of $291 million at a price range midpoint of $15 for Wednesday, October 7, 2015 on Nasdaq.

Summary

ACRS is a clinical-stage specialty pharmaceutical company focused on identifying, developing and commercializing innovative and differentiated topical drugs to address significant unmet needs in dermatology.

ACRS’s lead drug candidate, A-101, is a proprietary high-concentration hydrogen peroxide topical solution that ACRS is developing as a prescription treatment for seborrheic keratosis, or SK, a common non-malignant skin tumor.

Valuation

Glossary
Pre-IPO grade-score summary
http://gaskinsco.com/scr-rate.htm
Many IPOs in today’s environment are graded C+ and scored 7.
If the pre-IPO grade is below C+ or the score is below 7,
then our analysts may have some concerns about the company’s
outlook and/or its market segment.
If the pre-ipo grade is above C+ or the score is above 7,
then our analysts believe the company’s overall business outlook is very favorable.
C = unprofitable, C+ = profitable

Accumulated deficit (mm)

.

.

-$35

     

Per share dilution

.

.

-$9.32

     
             

Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

Aclaris Therapeutics (ACRS)

$291

n/a

-28.0

2.6

2.6

26%

Annualizing June 6 mos

       
             

Conclusion

Neutral, C, 5.5

Shareholders may buy $15mm, 20%

P/E of -28 indicating moderate cash burn rate relative to market cap

Price to book of 2.6

Phase 2 clinical trials completed

Business

ACRS is a clinical-stage specialty pharmaceutical company focused on identifying, developing and commercializing innovative and differentiated topical drugs to address significant unmet needs in dermatology.

ACRS’s lead drug candidate, A-101, is a proprietary high-concentration hydrogen peroxide topical solution that ACRS is developing as a prescription treatment for seborrheic keratosis, or SK, a common non-malignant skin tumor.

License Agreement with Rigel

In August 2015, ACRS entered into an exclusive, worldwide license and collaboration agreement with Rigel for the development and commercialization of products containing specified JAK inhibitors that Rigel has developed for the treatment of alopecia areata, or AA, and other dermatological conditions.

Under this agreement, ACRS intends to develop these JAK inhibitors for the treatment of AA and potentially for other dermatological conditions.

Under this agreement, ACRS agreed to pay Rigel an upfront non-refundable payment of $8.0 million within 30 business days of August 27, 2015.

In addition, ACRS agreed to make aggregate payments of up to $80.0 million upon the achievement of specified pre-commercialization milestones, such as clinical trials and regulatory approvals.

Further, ACRS agreed to pay up to an additional $10.0 million to Rigel upon the achievement of a second set of development milestones.

With respect to any products ACRS commercializes under the agreement, ACRS will pay Rigel quarterly tiered royalties on annual net sales of each product at a high single-digit percentage of annual net sales, subject to specified reductions

Phase 2 Clinical Trials for A-101

ACRS has completed three Phase 2 clinical trials of A-101 in over 300 patients with SK. In these trials, following one or two applications of A-101, ACRS observed clinically relevant and statistically significant improvements in clearing SK lesions on the face, trunk and extremities of the body.

Clinically relevant means that the observed results suggest a potential meaningful medical benefit, and statistically significant means that there is a low statistical probability, typically less than 5%, that the observed results occurred by chance alone.

Phase 3 Planned Clinical Trials

ACRS plans to commence three Phase 3 clinical trials of A-101 in patients with SK in the first quarter of 2016 and, if the results of these trials are favorable, to submit a New Drug Application, or NDA, for A-101 for the treatment of SK to the U.S. Food and Drug Administration, or FDA, in the fourth quarter of 2016. ACRS also intends to develop A-101 as a prescription treatment for common warts and A-102, a proprietary gel dosage form of hydrogen peroxide, as a prescription treatment for SK and common warts.

JAK Inhibitors

ACRS recently in-licensed the exclusive, worldwide rights to inhibitors of the Janus kinase, or JAK, family of enzymes, for specified dermatological conditions.

ACRS plans to develop these JAK inhibitors as potential treatments for hair loss associated with an autoimmune skin disease known as alopecia areata, or AA, and potentially for other dermatological conditions. ACRS intends to in-license or acquire additional drug candidates for other dermatological conditions to build a fully integrated dermatology company.

SK lesions are among the most common non-malignant skin tumors and one of the most frequent diagnoses made by dermatologists.

SK lesions typically have a waxy, scaly, slightly elevated appearance, and multiple lesions are often present.

Though the lesions are non-malignant, patients often elect to have their condition treated by a dermatologist, either because the lesions have become inflamed or because the patient feels they are cosmetically unattractive.

SK lesions are usually treated by cryosurgery, electrodesiccation, curettage or excision. Each of these methods may be painful or can result in pigmentary changes or scarring at the treatment site. No drugs have been approved by the FDA for the treatment of SK.

A study published in the Journal of The American Academy of Dermatology in 2006, which ACRS refers to as the AAD study, estimated that SK affects over 83 million people in the United States.

SK Lesions

Based on a market survey ACRS commissioned in 2014, ACRS estimates that there are 18.5 million patient visits to dermatologists for SK and dermatologists perform approximately 8.3 million procedures to remove SK lesions annually in the United States.

ACRS estimates that the cost of these procedures to third-party payors and patients is more than $1.2 billion annually.

Phase 2 Trials for SK Lesions

In June 2014, ACRS completed its Phase 2 clinical trial of A-101 in 35 patients with four SK lesions on the trunk; in December 2014, ACRS completed its Phase 2 clinical trial of A-101 in 172 patients with four SK lesions on the trunk or extremities; and in March 2015, ACRS completed its Phase 2 clinical trial of A-101 in 119 patients with a single SK lesion on the face. In each of these trials, following one or two applications of the two highest concentrations of A-101, ACRS observed clinically relevant and statistically significant improvements in clearing SK lesions.

ACRS held an end-of-Phase 2 meeting with the FDA in May 2015.

Based on the FDA's feedback regarding ACRS’s proposed design of the three planned Phase 3 clinical trials of A-101 in patients with SK lesions on the face, trunk and extremities, ACRS plans to commence these trials in the first quarter of 2016.

If the results of the Phase 3 clinical trials are favorable, ACRS intends to submit its NDA for A-101 for the treatment of SK to the FDA in the fourth quarter of 2016 and build a specialty sales force to market the product to dermatologists in the United States.

ACRS has also received written guidance from the European Medicines Agency, or EMA, regarding the design of its Phase 3 clinical trials for A-101 for the treatment of SK.

ACRS plans to seek a collaborator to commercialize A-101, if approved, in the European Union. ACRS has the exclusive right to commercialize A-101, if approved, in various countries throughout the world.

Intellectual Property

With respect to A-101, ACRS owns two issued U.S. patents, one issued patent in each of Australia, Germany, United Kingdom, India, New Zealand, Mexico, and Singapore, and a pending U.S. and PCT patent application.

ACRS does not currently rely on licenses to any third party's intellectual property for A-101.

The two U.S. patents include claims that cover the use of high-concentration hydrogen peroxide for the alleviation of SK and acrochordons.

The patents in Australia, New Zealand and India include claims that cover the use of high-concentration hydrogen peroxide for the alleviation of various skin conditions, including SK, acrochordons, corns, tags, acne, warts and rosacea.

The patents in Germany, the United Kingdom, Mexico and Singapore include claims that cover the use of high-concentration hydrogen peroxide for the alleviation of acrochordons.

The issued patents relating to the use of A-101 begin to expire in 2022, subject to any applicable patent term extension that may be available in a particular country.

ACRS’s pending U.S. and PCT patent application are directed to various formulations comprising high- concentration hydrogen peroxide, dosing regimens for such formulations, applicators for use with such formulations, and methods of treating various skin conditions, including SK and common warts, by the topical administration of such formulations.

ACRS plans to pursue the PCT application in numerous foreign countries, including in the European Union. Any claims that issue from these formal filings will expire in 2035, subject to any applicable patent term adjustment or extension that may be available in a particular country.

With respect to the JAK inhibitors ACRS licensed from Rigel, ACRS exclusively licenses in the field of dermatology multiple families of patents and applications relating to these compounds and the uses thereof.

In particular, ACRS exclusively licenses patents and applications with claims that specifically cover the composition of matter for these compounds in the United States, Australia, Brazil, Canada, Chile, China, Eurasia, the European Union, Hong Kong, Israel, India, Japan, Mexico, Malaysia, New Zealand, Peru, Singapore, Ukraine, Vietnam, and South Africa.

The issued patents specifically directed to these compounds begin to expire in 2030, subject to any applicable patent term adjustment or extension that may be available in a particular country.

ACRS also exclusively licenses applications in the United States, Australia, Canada, Europe and Japan with claims that cover the use of these compounds for the treatment of autoimmune alopecia.

Any claims that issue from these applications will expire in 2034, subject to any applicable patent term adjustment or extension that may be available in a particular country.

ACRS also licenses a family of patents and applications that relate to A-201 and A-301 that expire in 2023, subject to any applicable patent term adjustment or extension that may be available in a particular country.

Competition

With respect to A-101 for the treatment of SK, ACRS is aware of one biopharmaceutical company, BioLineRx Ltd., that is developing a combination drug candidate that targets SK, and another company, Skincential Sciences, Inc., that currently markets a line of cosmetic products targeting skin conditions, including SK. Neither of these products have been approved by the FDA for use in the United States.

With respect to A-101 for the treatment of common warts, ACRS is aware of one company, Nielsen BioSciences, that is developing a prescription treatment for common warts.

ACRS is aware of another company, G&E Herbal Biotechnology Co., LTD, that intends to initiate a Phase 2 clinical trial of a gel as a prescription treatment for common warts. In addition, other drugs have been used off-label as treatments for common warts.

ACRS could also encounter competition from over-the-counter treatments for common warts.

With respect to A-201 and A-301 for the treatment of AA, ACRS anticipates competing with sensitizing agents such as diphencyprone, or DPCP, and topical, intralesional and systemic corticosteroids, which have been found to occasionally reduce symptoms of AA.

Other treatments utilized for patchy AA include anthralin and minoxidil solution. ACRS may also compete with companies developing chemical agents to be used in topical immunotherapies, as well as companies developing biologics, immunosuppressive agents, laser therapy, phototherapy, other JAK inhibitors and prostaglandin analogues to treat AA.

5% Shareholders Pre-IPO

Entities affiliated with Vivo Ventures Fund VII, L.P.         25.8%

Beacon Bioventures Fund III Limited Partnership             24.1%  

Sofinnova Venture Partners VIII, L.P.      13.1%  

Entities affiliated with RA Capital Healthcare Fund, L.P.   6.5%    

Neal Walker       7.8%

Stephen A. Tullman       6.9%    

Albert Cha, M.D., Ph.D.             25.8%

Anand Mehra, M.D.       13.1%

Dividends

No dividends are planned.

Use of Proceeds

ACRS expects to receive $68 million from its IPO and use it for the following:

$22.0 million to complete its three planned Phase 3 clinical trials and seek regulatory approval of A-101 for the treatment of SK;

$13.0 million to fund continued research and development of A-101 for the treatment of common warts, including the completion of its planned Phase 2 clinical trials for this indication; and

the remainder to fund other research and development activities, including the development of A-102 for the treatment of SK and common warts and the development of A-201 and A-301 for the treatment of AA, as well as for working capital and other general corporate purposes, including to pursue its strategy to in-license or acquire additional drug candidates, although ACRS has no agreements or commitments for any specific acquisitions or in-licenses.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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