IPO Report: Neos Therapeutics (NEOS)

Francis Gaskins |

Neos Therapeutics (NEOS) is a pharmaceutical company focused on developing, manufacturing and commercializing products utilizing its proprietary modified-release drug delivery technology platform, which NEOS has already used to develop its three branded product candidates for the treatment of attention deficit hyperactivity disorder, or ADHD. The company is based in Grand Prairie, TX.

Three other companies are scheduled for the week of July 20. The full IPO calendar is available at IPO Premium.

SEC Documents

Manager, Joint-managers: UBS Investment Bank, BMO Capital Markets, RBC Capital Markets
Co-managers: JMP Securities

End of lockup (180 days): Tuesday, January 19, 2016
End of 25-day quiet period: Monday, August 17, 2015

NEOS scheduled a $60 million IPO with a market capitalization of $205 million at a price range midpoint of $15 for Thursday, July 23, 2015 on Nasdaq.

Neos Therapeutics Summary

NEOS is a pharmaceutical company focused on developing, manufacturing and commercializing products utilizing its proprietary modified-release drug delivery technology platform, which NEOS has already used to develop its three branded product candidates for the treatment of attention deficit hyperactivity disorder, or ADHD.

NEOS’s product candidates are extended-release, or XR, medications in patient-friendly, orally disintegrating tablets, or ODT, or liquid suspension dosage forms.

Neos Therapeutics Valuation

Glossary

Accumulated deficit (mm)

.

.

-$91

     

Per share dilution

.

.

-$11.21

     
             

Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

Neos Therapeutics (NEOS)

$206

128.4

-7.8

2.8

4.0

29%

             

Neos Therapeutics Conclusion

Neutral

P/E ratio of -7.8, indicates heavy cash bun relative to market cap

Many IPOs with a heavy cash burn rates don't actually IPO

Price to book of 2.8

Price to tangible book of 4

Shareholders may buy $20mmm, 33% of IPO

Neos Therapeutics Business

NEOS is a pharmaceutical company focused on developing, manufacturing and commercializing products utilizing its proprietary modified-release drug delivery technology platform, which NEOS has already used to develop its three branded product candidates for the treatment of attention deficit hyperactivity disorder, or ADHD.

Neos Therapeutics Extended Release, Orally Disintegrating or Liquid Suspension Dosage Forms

NEOS’s product candidates are extended-release, or XR, medications in patient-friendly, orally disintegrating tablets, or ODT, or liquid suspension dosage forms.

NEOS has a Prescription Drug User Fee Act, or PDUFA, goal date of November 9, 2015 for NT-0102, its methylphenidate XR-ODT.

A PDUFA goal date is a review performance goal for the FDA to meet in acting on a new drug application, or NDA.

Under PDUFA, as amended by the Food and Drug Administration Safety and Innovation Act, for fiscal year 2015, the FDA agreed to review and act on 90 percent of standard, non-new molecular entity NDAs, like the one submitted for NT-0102, within 10 months from the FDA's receipt of the NDA submission.

NEOS expects to resubmit a new drug application, or NDA, for NT-0202, its amphetamine XR-ODT, by the end of July 2015 and submit an NDA for NT-0201, its amphetamine XR liquid suspension, in the third quarter of 2015.

If approved, NEOS believes its product candidates will address an unmet need by providing more patient- and caregiver-friendly dosing options not previously available to patients in the $10.7 billion market for ADHD-indicated medications.

Neos Therapeutics Incorporates Two of the Most Commonly Prescribed Medications for the Treatment of ADHD

NEOS’s product candidates incorporate two of the most commonly prescribed medications for the treatment of ADHD, methylphenidate and amphetamine. NEOS’s proprietary modified-release drug delivery platform has enabled NEOS to create novel, extended-release ODT and liquid suspension dosage forms of these medications.

If approved, NEOS believes its most advanced product candidates, NT-0102 and NT-0202, will be the first methylphenidate XR-ODT and the first amphetamine XR-ODT, respectively, for the treatment of ADHD.

NEOS expects its patent estate, which NEOS developed internally and which includes composition-of-matter, method-of-manufacture and method-of-use patents and patent applications, some of which are not scheduled to expire until 2032, will provide additional protection for NEOS’s three branded product candidates.

Neos Therapeutics Market

In 2014 alone, 63.1 million prescriptions for medications with ADHD labeling, and principally in extended-release formulations, were written in the United States.

The vast majority of currently available dosage forms for ADHD are tablets and capsules.

Despite once-daily dosing of these extended-release formulations, NEOS believes there is a significant opportunity to improve compliance rates.

Up to 54% of the pediatric population and 40% of the adult population have reported difficulties with swallowing tablets and capsules.

NEOS believes that the inability, difficulty or reluctance of many patients to swallow intact tablets and capsules contributes to diminished compliance rates.

Such limitations highlight the need for more convenient dosing options such as ODT or liquids. To NEOS’s knowledge, no company has succeeded to date in commercializing an XR-ODT formulation of any ADHD medication, even though ODT are among the most preferred dosage forms of pharmaceutical products.

Further, there is currently no XR liquid suspension of amphetamine available. NEOS believes, therefore, there is a significant market opportunity to provide the two most prescribed medications for ADHD, methylphenidate and amphetamine, in two more convenient and patient-friendly dosage forms, ODT and liquid suspension, which NEOS developed using its proprietary technology platform.

Neos Therapeutics Intellectual Property

NEOS’s intellectual property portfolio consists of 9 patents and 11 patent applications in the United States, and 6 patents and 2 patent applications in foreign countries and regions.

NEOS’s intellectual property strategy emphasizes specific drug products, product groups, and technology platforms.

NEOS’s patents and patent applications covering specific drug products include claims to the drug products and to methods of using those products. NEOS’s patents and patent applications covering technology platforms include claims to methods of making products as well as claims to the products made by those methods.

NEOS’s XR-ODT product NT-0102 patent portfolio includes two granted U.S. patents, including pharmaceutical composition-of-matter claims covering controlled-release direct compression ODT with drug-resin particles and, among other things, composition of matter for NT-0102.

These patents are scheduled to expire in 2026 and 2032, respectively.

In addition, NEOS has received a Notice of Allowance for one U.S. non-provisional application, which also contains claims directed to, among other things, compositions of matter for NT-0102, which, if such claims are ultimately issued, would expire in 2032.

This portfolio also includes four other pending U.S. non-provisional applications.

Neos Therapeutics Competition

NEOS faces competition and potential competition from a number of sources, including pharmaceutical and biotechnology companies, generic drug companies, drug delivery companies and academic and research institutions.

NEOS believes the key competitive factors that will affect the development and commercial success of its product candidates include ease of administration and convenience of dosing, therapeutic efficacy, safety and tolerability profiles and cost.

Many of NEOS’s potential competitors have substantially greater financial, technical and human resources than NEOS does, as well as more experience in the development of product candidates, obtaining FDA and other regulatory approvals of products, and the commercialization of those products.

Consequently, NEOS’s competitors may develop modified-release products for the treatment of ADHD or for other indications NEOS may pursue in the future, and such competitors' products may be more effective, better tolerated and less costly than its product candidates.

NEOS’s competitors may also be more successful in manufacturing and marketing their products than NEOS is. NEOS will also face competition in recruiting and retaining qualified personnel and establishing clinical trial sites and patient enrollment in clinical trials.

Neos Therapeutics Generic Medications

NEOS’s three branded product candidates also face competition from commercially available generic and branded medications currently produced by companies that are promoting products in the ADHD market, including Shire (Vyvanse, Adderall XR, Intuniv), Janssen (Concerta), Eli Lilly (Strattera), Pfizer (Quillivant XR), Concordia (Kapvay), Noven (Daytrana), Novartis (Focalin XR and Ritalin LA), and related generics.

NEOS is also aware of efforts by several pharmaceutical companies with ADHD medications in clinical development, including Shire, Noven, Alcobra, Highland Therapeutics, Sunovion, Neurovance and Rhodes Pharmaceuticals.

Tris Pharmaceuticals is also working in this space to reformulate existing methylphenidate and amphetamine medications and has recently submitted an NDA for an amphetamine-based XR liquid suspension.

Neos Therapeutics 5% Shareholders Pre-IPO

Burrill Life Sciences Capital Fund III        13.15%

Entities affiliated with Jack W. Schuler   13.01%

Delaware Street Capital Master Fund, L.P.          10.17%

Entities affiliated with Presidio Partners, 2007 L.P.          12.97%

Entities affiliated with Essex Capital Corporation            10.21%

Entities affiliated with CAC, LLC             9.15%

Entities affiliated with John Patience Trust Dated July 23, 1993    7.24%

Entities affiliated with Deerfield Private Design Fund III, L.P.       6.27%

Neos Therapeutics Dividends

No dividends are planned.

Neos Therapeutics Use of Proceeds

NEOS expects to receive $54 million from its IPO and use it for the following:

$12.1 million for pre-commercialization planning of its three lead product candidates, NT-0102, NT-0202 and NT-0201;

$28.7 million for commercialization of its three lead product candidates, if approved; and

the remainder for working capital, capital expenditures and general corporate purposes, including investing further in research and development efforts.

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
NEOS Neos Therapeutics Inc. 6.85 0.00 0.00 109,109

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