IPO Report: Inotek Pharmaceuticals (ITEK)

Francis Gaskins |

InotekLogo.jpgInotek Pharmaceuticals (ITEK) is a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of therapies for glaucoma. It is based in Lexington, MA.

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

Manager, Joint-managers: Cowen and Company, Piper Jaffray
Co-managers: Canaccord Genuity, Nomura

ITEK scheduled a $65 million IPO with a market capitalization of $191 million at a price range midpoint of $14 for Thursday, Feb. 5, 2015 on Nasdaq.  SEC Documents

Inotek Pharmaceuticals Overview

ITEK is a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of therapies for glaucoma.

Glaucoma is a disease of the eye that is typically characterized by structural evidence of optic nerve damage, vision loss and consistently elevated intraocular pressure, or IOP.

ITEK’s lead product candidate, trabodenoson, is a first-in-class selective adenosine mimetic that ITEK rationally designed to lower IOP by restoring the eye’s natural pressure control mechanism.


Inotek Pharmaceuticals Valuation


Glossary
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Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

annualizing Sept 9 mos

         

Inotek Pharmaceuticals (ITEK)

$192

n/a

-19.4

3.3

3.3

33%

             

Inotek Pharmaceuticals Conclusion

Neutral

Therapies for glaucoma

Phase 3 trials expected mid-'15. 

Top line data by end of '16, or early '17

Insiders may purchase $10mm, 15.6%

Concurrent deb offering of $30mm

Price-to-book of 3.3

P/E ratio of -19 indicates moderate cash burn relative to market cap

Inotek Pharmaceuticals Business

ITEK is a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of therapies for glaucoma.

Glaucoma is a disease of the eye that is typically characterized by structural evidence of optic nerve damage, vision loss and consistently elevated intraocular pressure, or IOP.

Inotek Pharmaceuticals Lead Product

ITEK’s lead product candidate, trabodenoson, is a first-in-class selective adenosine mimetic that ITEK rationally designed to lower IOP by restoring the eye’s natural pressure control mechanism.

ITEK developed this molecule to selectively stimulate a particular adenosine subreceptor in the eye with the effect of augmenting the intrinsic function of the eye’s trabecular meshwork, or TM.

The TM regulates the pressure inside the eye and is also the main outflow path for the fluid inside of the eye that often builds up pressure in patients with glaucoma.

ITEK believes that by restoring the natural function of the TM and this outflow path, rather than changing the fundamental dynamics of pressure regulation in the eye, trabodenoson’s mechanism of action should result in a lower risk of unintended side effects and long term safety issues than other mechanisms of action.

Additionally, trabodenoson’s unique mechanism of action in the TM should complement the activity of existing glaucoma therapies that exert their IOP-lowering effects on different parts of the in-flow and out-flow system of the eye.

Inotek Pharmaceuticals Product  Pipeline

ITEK’s product pipeline includes trabodenoson monotherapy delivered in an eye drop formulation, as well as a fixed-dose combination, or FDC, of trabodenoson with latanoprost given once-daily, or QD.

ITEK is also evaluating the potential of trabodenoson to slow the loss of vision associated with glaucoma and degenerative retinal diseases.

FDA

ITEK isplanning an End-of-Phase 2 meeting with the U.S. Food and Drug Administration, or FDA, for trabodenoson in the first half of 2015.

ITEK expects to initiate a Phase 3 program for trabodenoson monotherapy in mid-2015, which will consist of two Phase 3 pivotal trials and a long-term safety study.

Based on ITEK's estimates of the rate of patient enrollment and assuming commencement in mid-2015, ITEK expects to report top-line data from the first of the two pivotal Phase 3 trials by late 2016 or early 2017, with a second pivotal trial being completed in 2017.

Inotek Pharmaceuticals Clinical Trials

 

Statistically significant results for the primary endpoint of ITEK’s completed Phase 2 clinical trial indicate that trabodenoson monotherapy has IOP-lowering effects in line with existing therapies, with a favorable safety and tolerability profile at all doses tested.

ITEK’s completed Phase 2 trial of trabodenoson co-administered with latanoprost, a prostaglandin analogue, or PGA, demonstrated IOP-lowering in patients who have previously had inadequate responses to treatment with latanoprost.

These patients represent PGA poor-responders, as evidenced by persistently elevated IOP at levels that typically require the addition of a second drug to further lower IOP.

ITEK is planning an End-of-Phase 2 meeting with the U.S. Food and Drug Administration, or FDA, for trabodenoson monotherapy in the first half of 2015.

ITEK expects to initiate a Phase 3 program for trabodenoson monotherapy in mid-2015, which will consist of two Phase 3 pivotal trials and a long-term safety study.

Based on ITEK’s estimates of the rate of patient enrollment and assuming commencement in mid-2015, ITEK expects to report top-line data from the first pivotal Phase 3 trial by late 2016 or early 2017.

If the primary objectives of its Phase 3 program are met, ITEK plans to submit a New Drug Application, or NDA, to the FDA for marketing approval of trabodenoson for the treatment of glaucoma in the United States.

ITEK plans to submit a marketing authorization application, or MAA, in Europe after filing its NDA for approval of trabodenoson in the United States.

Inotek Pharmaceuticals Intellectual Property

ITEK owns a patent portfolio covering the trabodenoson compound that includes issued patents in the United States, Europe, Japan, and several other countries.

These composition of matter patents are scheduled to expire by early 2026 in the United States and by mid-2025 abroad.

ITEK also owns an issued U.S. patent and have pending patent applications in Europe and Japan relating to the use of trabodenoson for reducing IOP.

The issued U.S. patent and the pending foreign patent applications, if issued, are scheduled to expire by 2030.

A detailed freedom-to-operate analysis has been conducted and ITEK is not aware of any third party rights or impediments to commercializing trabodenoson for use in ophthalmic indications in the United States or Europe.

ITEK’s patent portfolio includes issued U.S. patents relating to combinations of trabodenoson with carbonic anhydrase inhibitors and beta blockers.

ITEK is also pursuing patent applications in the United States and abroad relating to:

combinations of trabodenoson with PGAs, carbonic anhydrase inhibitors or beta blockers, in patent applications which, if issued, are scheduled to expire by 2031;

polymorphs of trabodenoson, in patent applications which, if issued, are scheduled to expire by 2033;

formulations of trabodenoson, in patent applications which, if issued, are scheduled to expire by 2034; and

ocular neuroprotective uses of trabodenoson, in patent applications which, if issued, are scheduled to expire by 2034.

Inotek Pharmaceuticals Competition

While ITEK believes that its experience and scientific knowledge provide it with competitive advantages,

ITEK faces competition from established branded and generic pharmaceutical companies, such as Novartis International AG and its subsidiary Alcon Labs, Allergan Inc., Bausch + Lomb, Inc. (now a unit of Valeant Pharmaceuticals International, Inc.), Merck & Co., Inc., Santen Inc., Aerie Pharmaceuticals, Inc. and smaller biotechnology and pharmaceutical companies, as well as from academic institutions, government agencies and private and public research institutions, which may in the future develop products to treat glaucoma.

Any product candidates that ITEK successfully develops and commercializes will compete with existing therapies and new therapies that may become available in the future.

Inotek Pharmaceuticals 5% shareholders pre-IPO

Devon Park Bioventures, L.P.    17.0%

Rho Ventures Entities  13.5%

Care Capital Entities      11.8%

MedImmune Ventures, Inc.         10.6%

Pitango Venture Capital Fund Entities     11.6%

Devang V. Kantesaria, M.D        17.1%

A.N. “Jerry” Karabelas, Ph.D.     11.8%

Isai Peimer        16.1%  

Inotek Pharmaceuticals Dividends

No dividends are planned.

Inotek Pharmaceuticals Use of proceeds

ITEK expects to receive $58 million from its IPO plus $28mm from the concurrent debt offerings.  Uses include the following:

$30.0 million to complete the first Phase 3 pivotal trial for trabodenoson monotherapy, including associated payments for direct clinical and non-clinical costs;

$8.0 million to fund the initiation of the second Phase 3 pivotal trial for trabodenoson monotherapy, including associated payments for direct clinical and non-clinical costs;

$9.0 million to complete a Phase 2 trial for its FDC product candidate, including associated payments for direct clinical and non-clinical costs, and the development of a commercial formulation;

$10.0 million to fund the initiation and enrollment of a long-term safety study;

$6.0 million to fund proof-of-concept clinical trials for optic neuropathies and degenerative retinal diseases, including associated payments for direct clinical and non-clinical costs;

$6.0 million to repay borrowings under and terminate ITEK existing notes payable agreements with Horizon Technology Finance Corporation and Fortress Credit Co LLC;

ITEK intends to repay borrowings under and terminate existing notes payable agreements with Horizon Technology Finance Corporation and Fortress Credit Co LLC with a portion of the net proceeds from this offering. The notes payable bear interest at a rate of 11.0% per annum and mature on October 1, 2016. As of September 30, 2014, the total principal balance owed under the notes payable agreements was $6.3 million and

the remainder for working capital and 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
ITEK Inotek Pharmaceuticals Corporation 6.80 -0.15 -2.16 268,463

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