IPO Report: NephroGenex (NRX)

NephroGenex ($NRX) is a pharmaceutical company focused on the development of therapeutics to treat kidney disease, an area of significant unmet medical need.

13 other companies are scheduled to IPO this week.  The full IPO calendar is available at IPOpremium.com

NRX scheduled a $40 million IPO with a market capitalization of $40 million at a price range midpoint of $13 for Friday, February 7, 2014, on the Nasdaq.

Manager, Joint managers: Aegis Capital

Co-Managers: None
SEC Documents

Overview
The product appears to be a sooped up derivative of the vitamin B6.  NRX is doing clinical studies rather than clinical trials.

Valuation

Glossary

Cash burn rate:  when a company loses money with minimal depreciation & amortization (think biopharmas), the negative Price/Loss ratio is an indication of cash burn rate.  The higher the loss the lower the absolute (negative) ratio.  The lower the loss the higher the absolute (negative) ratio.

Conclusion
Rating is neutral-to-negative, clinical studies not trials, shareholders not buying, relatively low cash burn rate.

Business

NRX is a pharmaceutical company focused on the development of therapeutics to treat kidney disease, an area of significant unmet medical need.

Pathogenic oxidative chemistries are collectively a group of oxygen-based chemical reactions that occur in the body during stress, injury, or disease, to form compounds that can induce pathological changes in tissues that effect normal physiological function.

These include (i) advanced glycation end-products (AGE’s), which are oxidative end products of glucose-modified biomolecules which adversely affect their function; (ii) reactive oxygen species (ROS), which are chemically reactive molecules containing oxygen such as oxygen ions and peroxides that when elevated in the body can induce pathology; and (iii) toxic carbonyls which are reactive compounds that can modify biomolecules and affect their function.

These chemistries are generally agreed to be involved in the etiology of diabetic nephropathy, a common complication of diabetes. NRX ise developing Pyridorin™ (“Pyridorin”), a small molecule drug that is a unique and broadly acting inhibitor of the pathogenic oxidative chemistries which are elevated in diabetic patients.

Lead product candidate
The oral form of Pyridorin (pyridoxamine dihydrochloride) is being developed as a chronic, therapeutic agent to slow the progression of diabetic nephropathy.

Pyridoxamine is a derivative of vitamin B6 and consists of a different chemical structure. It uniquely possesses activity against a broad range of pathogenic oxidative chemistries, a generally agreed causative factor in the development and progression of diabetic nephropathy.

The FDA has ruled that pyridoxamine is an investigational drug candidate and not eligible for sale as a dietary supplement. Its concentration in the blood cannot be increased by taking commercially available vitamin B6.

Clinical studies & trials
NRX licensed patents covering methods of use and synthesis of Pyridorin from BioStratum, Inc. in May of 2006, and subsequently acquired Pyridorin-related patents from BioStratum through a Series A financing completed in May of 2007.

At the time of acquisition, BioStratum, through its contracted investigators, contract research organizations, and collaborators had completed 5 preclinical efficacy studies, 36 preclinical safety studies, 4 Phase 1 studies and 5 Phase 2 studies with Pyridorin. After the acquisition, we conducted a multi-center, randomized, placebo-controlled Phase 2b study, namely PYR-210.

In addition, NRX worked with the FDA to establish a new regulatory pathway for Pyridorin approval.   Pyridorin has demonstrated preliminary evidence of efficacy in slowing the progression of diabetic nephropathy in relevant patient populations in three Phase 2 clinical studies.

Based on these results, Pyridorin will be further developed in a Phase 3 program agreed to by the U.S. Food and Drug Administration (FDA) under a Special Protocol Assessment (SPA). This Phase 3 program will use a novel endpoint based on a novel, events-based endpoint based on end stage renal disease (ESRD) or a 50% increase in serum creatinine (SCr). We believe this change will significantly reduce the cost and time for completion of the Phase 3 program compared to the traditional endpoint used in previous pivotal trials for diabetic nephropathy.

Intellectual property

NRX owns patents covering methods for using Pyridorin to treat diabetic nephropathy in patients with type 2 diabetes and elevated levels of SCr, and thus closely track the anticipated drug label for an approved Pyridorin drug.

These patents consist of an issued U.S. patent (U.S. Patent 8067444) and corresponding issued patents in Canada and Europe, which will expire in 2024 absent any extension to the patent term. As discussed in more detail herein, if and when its pharmaceutical products receive FDA approval, NRX expects to apply for patent term extensions on patents covering those products.

Competition

The biopharmaceutical industry is characterized by intense competition and rapid innovation.

Although NRX believes that Pyridorin is one of the few drug candidates in advanced clinical trials for diabetic kidney disease, its competitors may be able to develop other compounds or drugs that are able to achieve similar or better results. NRX’s potential competitors include major multinational pharmaceutical companies, established biotechnology companies, specialty pharmaceutical companies and universities and other research institutions.

Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies.

NRX believes the key competitive factors that will affect the development and commercial success of its product candidates are efficacy, safety and tolerability profile, reliability, convenience of dosing, price and reimbursement.

5% stockholders

Care Capital III, LLC?  59.9%

Funds affiliated with Rho Ventures? 23.1%

BioStratum, Incorporated?  9.4%

Use of proceeds

NRX expects to net $35.9 million from its IPO. Proceeds are allocated as follows:

$30 million to fund its Phase 3 Pyridorin clinical trial;

$1.5 million to fund the initiation of clinical development for an intravenous formulation of Pyridorin for the treatment of AKI in which pathogenic oxidative chemistries have been identified as a possible contributing factor to the severity of this condition; and

the remainder for general corporate purposes, general and administrative expenses, capital expenditures, working capital and prosecution and maintenance of its intellectual property.