IPO Report: Carbylan Therapeutics (CBYL)

Francis Gaskins |

carbylan_logo.jpgCarbylan Therapeutics (CBYL) is a clinical-stage specialty pharmaceutical company focused on the development and commercialization of novel and proprietary combination therapies that address significant unmet medical needs. Based in Palo Alto, CA.

Ten other companies are scheduled for the week of Feb. 2, 2015.  The full IPO calendar is available at IPOpremium.

Manager, Joint-managers: Leerink Partners
Co-managers: JMP Securities/ Wedbush PacGrow Life Sciences

CBYL scheduled a $75 million IPO with a market capitalization of $198 million at a price range midpoint of $13 for Wednesday, Feb. 4, 2015 on Nasdaq. SEC Documents

Carbylan Therapeutics Overview

CBYL is a clinical-stage specialty pharmaceutical company focused on the development and commercialization of novel and proprietary combination therapies that address significant unmet medical needs.

CBYL’s initial focus is on the development of Hydros-TA, its proprietary, potentially best-in-class intra-articular, or IA, injectable product candidate to treat pain associated with osteoarthritis, or OA, of the knee.

Carbylan Therapeutics Valuation


Glossary

Accumulated deficit (mm)

.

.

-$44

     

Per share dilution

.

.

-$8.41

     

-----------------------------------------------------------------------

     

Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

annualizing Sept 9 mos

         

Carbylan Therapeutics (CBYL)

$198

n/a

-17.3

2.8

2.8

38%

             

Carbylan Therapeutics Conclusion

Neutral

Knee osteoarthritis therapies

Top line Phase 3 results expected end of '15 & '16

Price-to-bk of 2.8, in range

P/E of -17 indicates moderate cash burn relative to market cap

Insiders not purchasing on the IPO

Carbylan TherapeuticsBusiness

CBYL is a clinical-stage specialty pharmaceutical company focused on the development and commercialization of novel and proprietary combination therapies that address significant unmet medical needs.

CBYL’s initial focus is on the development of Hydros-TA, its proprietary, potentially best-in-class intra-articular, or IA, injectable product candidate to treat pain associated with osteoarthritis, or OA, of the knee.

Carbylan Therapeutics US expectations

Upon FDA approval, CBYL expects to commercialize Hydros-TA for OA pain in the knee in the United States with an approximately 50 to 100 person specialty sales force targeting orthopedic surgeons, rheumatologists and pain specialists.

Carbylan Therapeutics Hydros-TA

Current joint injection, or intra-articular, treatments for OA pain include corticosteroids, commonly known as steroids, which provide short-term relief, and viscosupplements, which provide pain relief over the longer-term.

In contrast, Hydros-TA utilizes CBYL’s proprietary cross-linking technology to deliver both rapid pain relief with a low dose steroid triamcinolone acetonide, or TA, and sustained pain relief with CBYL’s proprietary hyaluronic acid viscosupplement.

Hydros-TA is a combination IA product designed to provide both rapid and sustained pain relief.

CBYL believes the low dose steroid component of Hydros-TA will provide rapid pain relief as well as sustained pain relief up to six months, from CBYL's proprietary hyaluronic acid component.

Hydros-TA is currently being studied in a Phase 3 trial, referred to as COR1.1.

CBYL expects to initiate a second Phase 3 trial, referred to as COR1.2, to open an investigational new drug application, or IND, and begin enrolling U.S. patients in mid-2015.

CBYL anticipates reporting top-line results from COR1.1 and COR1.2 by the end of 2015 and 2016, respectively, and submitting the NDA for Hydros-TA in early 2017.

Carbylan Therapeutics Technology License Agreement

In November 2012, CBYL entered into a technology license agreement with Shanghai Jingfeng Pharmaceutical Co., Ltd., or Jingfeng, where CBYL granted to Jingfeng an exclusive license to develop, manufacture and commercialize Hydros-TA in China, Taiwan, Hong Kong and Macau.

In consideration for the exclusive license, CBYL received a non-refundable up-front payment of $2.0 million ($1.7 million net of Chinese withholding tax).

Additionally, CBYL is eligible to receive future regulatory milestone payments of up to $1.5 million, which are considered non-substantive milestones for accounting purposes, and commercialization royalty payments of up to approximately $5.0 million (each excluding Chinese withholding tax).

Other than the arrangement with Jingfeng, CBYL owns global development and commercialization rights to Hydros-TA.

Carbylan Therapeutics Clinical Trials

In CBYL’s Phase 2b study of 98 patients, though not designed to show statistical significance, Hydros-TA demonstrated better pain reduction at all time points measured than Synvisc-One, the U.S. market-leading viscosupplement.

CBYL is currently studying Hydros-TA in an international Phase 3 trial enrolling up to 510 patients, and CBYL expects to open an investigational new drug application, or IND, and begin to enroll U.S. patients in its second Phase 3 trial in mid-2015.

Carbylan Therapeutics Joint Disorder

OA is a joint disorder involving the degradation of the IA cartilage, joint lining, ligaments and, ultimately, underlying bone.

OA results in inflammation of the soft tissue and bony structures of the joint, which worsens over time and leads to progressive thinning of articular cartilage.

Symptoms of this disease include pain, stiffness, swelling and limitation in the function of the joint.

There is no known way to reverse the progression of OA and while there are a number of therapeutic options to treat the pain associated with OA, even with treatment, the disease typically continues to progress and patients may eventually require joint replacement surgery, often referred to as total knee arthroplasty, or TKA.

Relative to therapeutic options to treat the pain, TKA is very expensive, with a cost of approximately $33,000 to $40,000 for an initial surgery and $74,000 for a revision surgery, thereby resulting in a meaningful burden on the healthcare system.

OA severity is generally graded on a scale from one to four.

When OA advances and oral or topical drug treatments are not sufficient to effectively address the associated pain, physicians often turn to IA treatments, such as steroids, and hyaluronic acid, or HA, viscosupplements.

While steroid injections can provide rapid pain relief, they generally provide only short-term pain relief of two to four weeks post injection.

On the other hand, while HA injections can often provide long-term pain relief of up to approximately six months, they do not generally begin to provide peak pain relief until five weeks post injection.

As a result, CBYL believes there is a significant unmet medical need for a single product that provides both rapid and sustained pain relief in a safe and effective manner.

Carbylan Therapeutics Intellectual Property

In November 2012, CBYL entered into a technology license agreement with Jingfeng, pursuant to which CBYL granted Jingfeng the exclusive right and license to develop, manufacture and commercialize Hydros-TA, or any improvements or modifications of Hydros-TA, for human and veterinary uses in China, Taiwan, Hong Kong and Macau.

In these countries, Jingfeng is responsible for the manufacture and supply of Hydros-TA, the management and funding of all development activities, regulatory submissions and regulatory approvals for Hydros-TA, and the commercialization of Hydros-TA.

Jingfeng is restricted from developing, manufacturing, using, distributing, marketing, importing and selling Hydros-TA outside of the foregoing territories.

As of January 1, 2015, CBYL is the owner of record of four issued or allowed US patents and eight issued or allowed non-US patents, and CBYL is actively pursuing an additional two U.S. patent applications and 17 non-US patent applications.

CBYL also relies on trade secrets and careful monitoring of its proprietary information to protect aspects of its business that are not amenable to, or that CBYL does not consider appropriate for, patent protection.

Carbylan Therapeutics Competition

The key competitive factors affecting the success of Hydros-TA, if approved, are likely to be efficacy, durability, safety, price and the availability of reimbursement from government and other third-party payors.

CBYL believes it will compete favorably by having a fast-acting, long lasting, effective candidate that has a validated mechanism of action for OA pain relief and an attractive safety profile.

Intra-articular Therapies.
Currently available steroid injections are effective at providing pain relief within a couple of days, but they do not last for more than about a month and can have a damaging effect on the healthy cartilage.

Most of these steroid injections are interchangeable with the choice usually stemming from cost to the patient and physician preference.

Specifically, Flexion Therapeutics is developing FX006 which is a time release steroid composed of triamcinolone acetonide encapsulated in PGLA particles providing pain relief of up to approximately 10 weeks post injection.

There are five multi-injection viscosupplements (Hyalgan, Orthovisc, Supartz, Synvisc and Euflexxa) and three single-injection products (Synvisc-One, Gel-One and Monovisc) that are currently on the market.

Each of these products is derived from HA, which generally does not begin to provide peak pain relief until five weeks post injection.

Combination and Other Therapies.
 A combination of viscosupplementation and corticosteroid is also being evaluated by Anika Therapeutics.

The Anika product, called Cingal, is a combination of hyaluronic acid (Monovisc) and triamcinolone hexacetonide (TH) providing pain relief of up to approximately 12 weeks post injection.

This product was recently evaluated in a three arm trial comparing Monovisc and Cingal to placebo.

To CBYL’s knowledge, the study results have not yet been released to the public, and this is the first human trial with this product. Ampio Therapeutics is developing an injectable treatment for OA knee pain called Ampion.

Ampion is comprised of aspartyl-alanyl diketopiperazine, an endogenous immunomodulatory molecule derived from the N-terminus of human serum albumin. To CBYL’s knowledge, Ampion is currently under evaluation in a Phase 3 trial.

Carbylan Therapeutics 5% Shareholders Pre-IPO

ACP IV, L.P.     30.2%

InterWest Partners IX, L.P.         33.2%

Entities affiliated with Vivo Ventures       27.8%

Albert Cha, M.D., Ph.D.             27.8%

Guy P. Nohra    30.2%              

Carbylan Therapeutics Dividends

No dividends are planned.

Carbylan Therapeutics Use of Proceeds 

CBYL expects to receive $67 million from its IPO and use it for the following:

$25.0 million to $35.0 million to fund its continued research and discovery efforts, including to fund to completion both its ongoing COR1.1 and its future COR1.2 Phase 3 clinical trials of Hydros-TA in support of an NDA filing with the FDA;

the remainder for working capital and other corporate purposes, which may include the pursuit of other research and discovery efforts, including the development of Hydros-TA for the treatment of OA pain in other joints in the body.

CBYL may also use a portion of the net proceeds from this offering to repay its secured debt facility with Silicon Valley Bank, under which CBYL owes approximately $4.5 million in principal and interest as of September 30, 2014.

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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