IPO Report: Dermira (DERM)

Francis Gaskins |

Dermira IPO, IPO report, IPOs this week, small-cap stocksDermira ($DERM) is a specialty biopharmaceutical company focused on bringing innovative and differentiated medical dermatology products to dermatologists and their patients. It is based in Redwood City, CA.

Ten other companies are scheduled for the week of Sept. 29, 2014.  The full IPO calendar is available at IPOpremium.

Manager, Joint-managers:  Citigroup and Leerink Partners

Co-managers: Guggenheim Securities and Needham & Company

DERM scheduled an $81 million IPO with a market capitalization of $254 million at a price midpoint of $15, for Friday, October 3, 2014 on Nasdaq. SEC filings

Dermira IPO Report

Overview

DERM  is a specialty biopharmaceutical company focused on bringing innovative and differentiated medical dermatology products to dermatologists and their patients.

DERM is developing the lead product, Cimzia,in collaboration with UCB Pharma S.A., for the treatment of moderate-to-severe plaque psoriasis.

The three lead products are in Phase 2 clinical trials.

Valuation

Glossary

Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

.

           

Dermira (DERM)

$254

n/a

-7.5

2.0

2.7

32%

             

Conclusion

Neutral

Dermatology products

Phase 2 clinical trials, 2.7 times tangible book

Relatively high cash drain, P/E of -7.6

Shareholders indicate an interest in purchasing up to $15 million

Business

DERM  is a specialty biopharmaceutical company focused on bringing innovative and differentiated medical dermatology products to dermatologists and their patients.

The strategy is to in-license, acquire, develop and commercialize products that DERM believes can be successful in the dermatology marketplace.

Five product candidates

The portfolio of five product candidates targets significant market opportunities and includes three late-stage product candidates:

Cimzia (certolizumab pegol)

Cimzia (certolizumab pegol), which DERM is developing in collaboration with UCB Pharma S.A., for the treatment of moderate-to-severe plaque psoriasis.

DERM has entered into an agreement to collaborate with UCB to develop Cimzia for the treatment of moderate-to-severe plaque psoriasis in the United States, Canada and the European Union and, upon regulatory approval, to market Cimzia to dermatologists in the United States and Canada.

UCB has conducted two Phase 2 clinical trials, including a 176-patient, randomized, multi-center, double-blind, placebo-controlled trial, that demonstrated significant reductions in the signs and symptoms of moderate-to-severe plaque psoriasis.

DERM and UCB conducted an end-of-Phase 2 meeting with the U.S. Food and Drug Administration, or the FDA, in June 2014, filed an investigational new drug application, or IND, for the treatment of moderate-to-severe plaque psoriasis with the FDA in September 2014 and intend to commence Phase 3 clinical trials in the first half of 2015.

DRM04

DRM04, which DERM is developing for the treatment of hyperhidrosis, or excessive sweating.

DRM04, a topical, small-molecule anticholinergic product we are developing for the treatment of hyperhidrosis. Anticholinergics are a class of pharmaceutical products that exert their effect by blocking the action of acetylcholine, a molecule that transmits signals within the nervous system that are responsible for a range of bodily functions, including the activation of sweat glands.

DRM04 is a topical formulation of a novel form of an anticholinergic agent that has been approved for systemic administration in other indications, and it is designed to inhibit sweat production by blocking the activation of sweat glands following topical administration.

Two randomized, double-blind, vehicle-controlled Phase 2 clinical trials, including a 198-patient, multi-center Phase 2b clinical trial and a 38-patient Phase 2a clinical trial, have demonstrated significant reductions in the signs and symptoms of primary axillary, or underarm, hyperhidrosis in patients treated with a topical formulation of the anticholinergic agent that has been approved for systemic administration in other indications, which we call the topical formulation of the reference agent.

In addition, DERM is currently conducting a Phase 2b clinical trial in patients with primary axillary hyperhidrosis in which DERM is comparing DRM04 to the topical formulation of the reference agent.

DERM expects data from this trial in the first half of 2015. If successful, DERM intends to commence a Phase 3 clinical program, which would include one or more Phase 3 clinical trials, in the second half of 2015.

DRM01

DRM01, which DERM is developing for the treatment of acne.

DRM01, a novel, topical, small-molecule sebum inhibitor we are developing for the treatment of acne.

Sebum is an oily substance made up of lipids produced by glands in the skin called sebaceous glands, and excessive sebum production is an important aspect of acne that is not addressed by available topical therapies. DRM01 is a prodrug designed to inhibit the production of sebum by delivering a widely-studied lipid synthesis inhibitor to the skin following topical administration.

DERM has completed a 108-patient, randomized, multi-center, double-blind, vehicle-controlled Phase 2a clinical trial that demonstrated significant reductions in the signs and symptoms of acne.

Based on the results of this Phase 2a clinical trial, we intend to file an IND with the FDA and commence a Phase 2b clinical program, which would include one or more clinical trials, in the first half of 2015

Intellectual property

Since founding in 2010, DERM has executed three significant transactions resulting in a portfolio of five product candidates.

In August 2011, DERM acquired Valocor Therapeutics, Inc., which gave DERM rights to a portfolio of intellectual property and product candidates to treat acne and inflammatory skin diseases.

In April 2013, DERM entered into agreements with Rose U LLC and Stiefel to obtain rights to intellectual property related to DRM04 for the treatment of hyperhidrosis.

In March 2014, DERM entered into an agreement to collaborate with UCB to develop and commercialize Cimzia in dermatology.

Competition

Many pharmaceutical companies currently offer products, and continue to develop additional alternative product candidates and technologies, for indications similar to those targeted by DERM's  product candidates, including AbbVie Inc. (ABBV) , Actavis plc (ACT) , Allergan, Inc. (AGN) , Amgen Inc. (AMGN) , Anacor Pharmaceuticals, Inc. (ANAC) , Astellas Pharma US, Inc. (ALPMY) , Bayer HealthCare AG (formerly Intendis, Inc.) (BAYRY) , Eisai Co., Ltd. (ESALY) , Galderma S.A., GlaxoSmithKline LLC (GSK) , Janssen Biotech, Inc., Johnson & Johnson (JNJ) , LEO Pharma A/S, Maruho Co., Ltd., Merck & Co., Inc. (MRK) , Miramar Labs, Inc., Mitsubishi Tanabe Pharma Corporation (MTZPY) , Mylan Inc. (MYL) , Pfizer Inc. (PFE) , Regeneron Pharmaceuticals (REGN) , Revance Therapeutics, Inc. (RVNC) , Takeda Pharmaceutical Company Limited (TKPYY) , Teva Pharmaceutical Industries Ltd. (TEVA) , and Valeant Pharmaceuticals International (VRX) .

The markets for dermatological therapies are competitive and are characterized by significant technological development and new product introduction.

DERM anticipates that, if it obtains regulatory approval of product candidates, it will face significant competition from other approved therapies. If approved, DERM's product candidates may also compete with unregulated, unapproved and off-label treatments.

5% shareholders pre-IPO

Entities affiliated with New Enterprise Associates, 21%

Entities affiliated with Bay City Capital, 21%

Canaan VIII L.P., 15%     

UCB S.A., 8.4%

Maruho Co., Ltd., 7.3% 

Apple Tree Partners IV, L.P., 6.4%           

Entities affiliated with Fidelity Investments, 6.4%

Dividends

No dividends planned

Use of proceeds

DERM expects to net $79 million from its IPO and concurrent private placement.

As of June 30, 2014, DERM had cash and cash equivalents of $9.8 million and received an additional $48.8 million in net proceeds from the sale of shares of Series C convertible preferred stock in August 2014.

DERM currently intends to use the net proceeds from this offering and the concurrent private placement, together with existing cash and cash equivalents, as follows:

• $40 million to fund external research and development expenses associated with the development of the Cimzia product candidate, net of development milestone payments expected to receive from the  partner UCB Pharma S.A.;

• $30 million to fund external research and development expenses associated with the development of the DRM04 product candidate;

•  $15 million to fund external research and development expenses associated with the development of the DRM01 product candidate; and

•the balance used to fund internal research and development expenses associated with all product candidates, working capital, capital expenditures and other general corporate purposes.

 

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

Companies

Symbol Name Price Change % Volume
GSK GlaxoSmithKline PLC 37.67 -0.03 -0.08 3,828,923
JNJ Johnson & Johnson 111.94 -0.02 -0.02 5,451,568
VRX Valeant Pharmaceuticals International Inc. 15.34 -0.11 -0.71 11,792,704
DERM Dermira Inc. 31.13 0.15 0.48 148,524
ANAC Anacor Pharmaceuticals Inc. n/a n/a n/a 0
AGN Allergan plc 191.18 1.49 0.79 4,295,318
ABBV AbbVie Inc. 60.86 1.43 2.41 10,227,657
RVNC Revance Therapeutics Inc. 17.85 0.05 0.28 150,185
AMGN Amgen Inc. 145.29 1.28 0.89 3,855,532
PFE Pfizer Inc. 31.59 -0.04 -0.13 19,300,328
TEVA Teva Pharmaceutical Industries Limited American De 37.04 0.51 1.40 6,751,513
MRK Merck & Company Inc. (new) 60.25 -0.88 -1.44 12,985,234
REGN Regeneron Pharmaceuticals Inc. 369.82 -2.89 -0.78 661,740
MYL Mylan N.V. 35.65 -0.34 -0.94 3,528,345

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