IPO Report: Foamix Ltd. (FOMX)

Foamix Ltd. ($FOMX) is a clinical-stage specialty pharmaceutical company focused on developing and commercializing its proprietary minocycline foam for the treatment of acne, impetigo and other skin conditions. It is based in Rehovot, Israel.

Six other companies are scheduled for the week of Sept. 15, 2014 including Alibaba. The full IPO calendar is available at IPOpremium.

The manager and co-managers are Barclays and Cowen & Company.

The joint managers are Oppenheimer & Co. and Maxim Group LLC.

FOMX scheduled a $65 million IPO with a market capitalization of $234 million at a price range midpoint of $11 for Thursday, Sept. 18, 2014 on the Nasdaq.  SEC filings

Foamix IPO Report

Overview

FOMX is a clinical-stage specialty pharmaceutical company focused on developing and commercializing its proprietary minocycline foam for the treatment of acne, impetigo and other skin conditions.

Based on clinical trials, FOMX believes that FMX101 has the potential to become the new standard of care for the moderate-to-severe acne market.

The P/E ratio is -62, which indicates a low cash burn rate relative to the market cap.

Valuation

Glossary

Conclusion

The rating on FOMX is neutral

Large acne market, Encouraging clinical trial results

License agreements with Bayer AG (Intendis), Merz Pharmaceuticals, LLC and Actavis

Low cash burn  rate relative to market cap

Business

FOMX is a clinical-stage specialty pharmaceutical company focused on developing and commercializing its proprietary minocycline foam for the treatment of acne, impetigo and other skin conditions.

Market

According to the American Academy of Dermatology, acne affects approximately 40 to 50 million people in the U.S. alone, approximately 10 million of whom suffer from moderate-to-severe acne according to the Journal of Investigative Dermatology.

The U.S. market for branded prescription drugs for acne was estimated to be approximately $2.6 billion for the 12 months ended March 31, 2014, of which $1.0 billion was attributed to oral antibiotics such as Solodyn, the current standard of care for moderate-to-severe acne, and the remaining $1.6 billion was attributed to topical drugs such as Epiduo and Aczone, which are used to treat mild acne.

Technology platform

FOMX developed FMX101 and FMX102 using its proprietary technology, which includes its foam-based platforms.

This technology enables FOMX to formulate and stabilize a wide variety of drugs and deliver them directly to their target site.

FOMX’s foam platforms have significant advantages over alternative delivery options and are suitable for multiple application sites, creating a potential pipeline of products across a range of conditions to drive future growth.

Lead product candidates & clinical trials

FOMX’s lead product candidates, FMX101 for moderate-to-severe acne and FMX102 for impetigo, are novel topical foam formulations of the antibiotic minocycline. FOMX’s clinically and statistically significant Phase II clinical trial results demonstrate that FOMX’s minocycline foam, FMX101, provides a faster, more effective treatment than the reported results for oral minocycline, the current standard of care for moderate-to-severe acne, and does so with fewer side effects.

Based on these results, FOMX believes that FMX101 has the potential to become the new standard of care for the moderate-to-severe acne market.

FMX101 for moderate-to-severe acne.   

FMX101, a 4% minocycline foam formulation for moderate-to-severe acne, is its lead product candidate.

In 2013, FOMX completed a dose-ranging Phase II clinical trial of FMX101 in Israel, involving 150 patients aged 12 to 25 with moderate-to-severe acne.

This trial demonstrated both clinically and statistically significant efficacy versus the control placebo group, with FMX101 reducing inflammatory acne lesions by 71% in only six weeks and non-inflammatory lesions by 73% in 12 weeks. In addition, no drug-related systemic side effects were observed.

Phase II clinical trial for FMX102

FOMX has also completed a Phase II clinical trial for FMX102, and based on its efficacy and safety profile, FOMX believes it will present an attractive option for the treatment of impetigo, including impetigo caused by methicillin-resistant staphylococcus aureus, or MRSA.

FOMX expects to commence pivotal Phase III clinical trials for both product candidates in 2015.

License agreements

In addition, FOMX has entered into development and license agreements relating to its technology with various pharmaceutical companies such as Bayer AG (Intendis), Merz Pharmaceuticals, LLC and Actavis plc, which, from FOMX’s inception to June 30, 2014, have generated approximately $14.7 million in revenues.

The agreements may entitle FOMX to an additional aggregate amount of up to approximately $30 million in contingent payments if certain conditions are met.

FOMX is further entitled to royalties from net sales of the licensed products (or, in certain cases, from net profits generated by them) if they are approved for marketing by the relevant regulatory authorities and commercialized by the licensees.

Dividend Policy

No dividends are planned.

Intellectual Property

FOMX’s most important patent is its U.S. patent relating to its lead product candidates, FMX101, FMX102 and FDX104, which is expected to remain in effect until 2030.

This patent comprises a claim to a formulation of a tetracycline antibiotic which can include minocycline or doxycycline.

FOMX’s other patents granted in the U.S. have claims relating to certain formulations of its foam platforms and other technology, including emulsion foams, hydrophobic foams and aqueous foams.

As of August 31, 2014, FOMX’s continuous effort in protecting and fortifying its unique intellectual property has yielded a patent portfolio of 70 granted patents in certain countries worldwide, including 31 granted patents in the U.S.

Additionally, as of August 31, 2014, FOMX had 114 pending patent applications worldwide, of which 60 are pending in the U.S. describing and claiming its multiple foam based platforms and other technology.

FOMX has several composition of matter patent applications pending in relation to FMX101, FMX102 and FDX104 in the U.S. as well as one pending in each of the following international markets, Australia, Brazil, Canada, China, the European Union, India, Israel and Mexico. FOMX’s other pending applications relate to various foam platforms such as emulsion foam, hydrophobic foam, hydro-alcoholic foam and water-free foams, as well as specialty foams (such as potent solvent foams) and FOMX’s recently-developed ‘metered dose dispenser’ for controllable dosing.

Competition

As more companies develop new intellectual property in FOMX’s markets, the possibility of a competitor acquiring patent or other rights that may limit FOMX’s products or potential products increases, which could lead to litigation.

In addition, FOMX faces competition from the current standard of care.

The current standard of care for moderate-to-severe acne includes oral antibiotic drugs such as Solodyn, Doryx, Dynacin and Minocin, in which minocycline or doxycycline are the active ingredients, occasionally in combination with topical anti-acne drugs such as Acanya, Aczone, Ziana, Epiduo, Benzaclin and Differin.

The current standard of care for impetigo is the topical agent Bactroban, with Altabax being the most recently approved topical agent for such indication.

The active ingredients in Bactroban and Altabax are the antibiotics mupirocin and retapamulin, respectively.

The standard of care for moderate-to-severe rosacea are oral minocycline and doxycycline drugs such as Oracea, the most recently approved oral doxycycline drug for rosacea.

The standard of care for milder cases of rosacea are topical drugs such as MetroGel and Finacea.

However, based on its clinical trials, FOMX believes that FMX101 and FMX102 have competitive advantages over the current alternatives and have significantly less adverse side effects.

5% stockholders

Tamarkin Medical Innovation Ltd. 21.1%

Meir Eini Holdings Ltd. 21.5%

Amos and Daughters Investments and Properties Ltd. 12.1%

Benny Shabtai  9.4%

Rosa Alba Commerce & Investments Ltd. 7.4%

Amiram Bornstein 6.7%

Doron Freidman 5.7%

Use of proceeds

FOMX intends to use the $58 million in proceeds from its IPO as follows:

$20–$25 million to conduct Phase III clinical trials and other pre-launch studies, including any animal and human toxicology studies, for FMX101 for the treatment of moderate-to-severe acne;

$10–$15 million to conduct Phase III clinical trials and other pre-launch studies, including any animal and human toxicology studies, for FMX102 for the treatment of impetigo;

up to $5 million to conduct a Phase I/II clinical trial for FDX104 for the treatment of chemotherapy-induced rashes; and

the balance, if any, to conduct a Phase II clinical trial for FMX101 for the treatment of rosacea, for research and development of other pipeline products and for other general corporate purposes.