IPO Report: rEVO Biologics (RBIO)

rEVO Biologics ($RBIO) is a commercial-stage biopharmaceutical company focused on the development and commercialization of specialty therapeutics to address unmet medical needs in patients with rare, life-threatening conditions. It is based in Framingham, MA.

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 Piper Jaffray and Guggenheim Securities.

The joint manager are Roth Capital and BTIG.

RBIO scheduled a $50 million IPO with a market capitalization of $258 million at a price range midpoint of $14 for Wednesday, September 17, 2014 on the Nasdaq. SEC fililngs

rEVO Biologics IPO Report

Overview

RBIO is a commercial-stage biopharmaceutical company focused on the development and commercialization of specialty therapeutics to address unmet medical needs in patients with rare, life-threatening conditions.

RBIO’s commercial product ATryn, the first and only approved recombinant human antithrombin, has been marketed in the United States since 2009 for the prevention of blood clots during or after surgery or childbirth in patients with a rare clotting disorder known as hereditary antithrombin deficiency, or HD AT.

RBIO believes the market can be much larger if it can expand ATryn’s FDA-approved label to include additional indications such as the management of preeclampsia

Valuation

Glossary

Recommendation

The rating is neutral to slightly positive.

RBIO believes the market can be much larger if it can expand ATryn’s FDA-approved label to include additional indications such as the management of preeclampsia.

LFB Biotech, the 'parent', has agreed to purchase $10.0 million in shares of common stock in a separate private placement contingent on and concurrent with the completion of this offering

History & Formation

RBIO was  incorporated in Massachusetts in February 1993 as Genzyme Transgenics Corporation, a wholly-owned subsidiary of Genzyme Corporation.

In July 1993, the initial public offering was completed. In May 2002, the name was  changed to GTC Biotherapeutics, Inc.

In July 2009, LFB Biotech became a majority stockholder in December 2010, acquired the remaining shares to become the sole stockholder, and the company ceased being a public reporting company.

LFB Biotech is a wholly-owned subsidiary of LFB, which is wholly-owned by the French state.

RBIO changed its name to rEVO Biologics, Inc. in January 2013.

 On March 31, 2014, RBIO divested manufacturing and other non-ATryn clinical assets and liabilities to LFB USA, a newly formed subsidiary of LFB Biotech, and on April 11, 2014, RBIO  completed a reincorporation merger to Delaware.

Business

RBIO is a commercial-stage biopharmaceutical company focused on the development and commercialization of specialty therapeutics to address unmet medical needs in patients with rare, life-threatening conditions.

RBIO’s commercial product ATryn, the first and only approved recombinant human antithrombin, has been marketed in the United States since 2009 for the prevention of blood clots during or after surgery or childbirth in patients with a rare clotting disorder known as hereditary antithrombin deficiency, or HD AT.

ATryn is manufactured using recombinant technology, through which human antithrombin is produced in the milk of transgenic animals.

Antithrombin is a naturally occurring plasma protein in the human body that regulates the activity of proteins that promote blood clotting.

RBIO estimates that 2013 sales of all antithrombin products totaled approximately $50.0 million in the United States.

RBIO believes the market can be much larger if it can expand ATryn’s FDA-approved label to include additional indications such as the management of preeclampsia

Preeclampsia market

The Preeclampsia Foundation estimates the annual healthcare costs of preeclampsia is more than $7.0 billion in the United States, including approximately $3.0 billion relating to maternal disabilities and approximately $4.0 billion relating to infant morbidity.

The only known way to stop the progression of preeclampsia is delivery of the baby.

However, delivery prior to week 34 of pregnancy puts the baby at a significantly elevated risk of death or serious lifelong medical problems which, in turn, carry increased medical costs.

RBIO believes that ATryn’s anti-inflammatory and anticoagulant properties will slow the progression of preeclampsia and prolong pregnancy, which RBIO believes will confer a reduction in neonatal morbidity and mortality with each passing day

Phase III trial

In July 2014, RBIO commenced enrollment in its pivotal Phase III clinical trial of ATryn to manage preeclampsia in weeks 24 to 28 of pregnancy, or PE (weeks 24-28).

If RBIO achieves positive results from this trial, which RBIO refers to as PRESERVE-1, RBIO plans to study ATryn for the management of preeclampsia in weeks 29 to 33 of pregnancy, or PE (weeks 29-33). RBIO may study ATryn for other acquired antithrombin deficiencies associated with emergency or life-threatening conditions for which RBIO believes ATryn’s anti-inflammatory and anticoagulant properties would be well-suited.

Preeclampsia is a serious and progressive disorder of pregnancy that can escalate to multiorgan failure, seizures, coma or death in the mother or baby.

PRESERVE-1 is a randomized, double-blind, placebo-controlled, multicenter pivotal Phase III clinical trial in North America of ATryn to manage PE (weeks 24-28), which impacts approximately 5,000 pregnancies each year in the United States.

If PRESERVE-1 demonstrates prolongation of pregnancy and, consequently, decreased infant morbidity and mortality in a sufficiently robust fashion, RBIO plans to submit a supplement to ATryn’s Biologics License Application, or BLA, seeking approval of ATryn to manage PE (weeks 24-28).

FDA

The U.S. Food and Drug Administration, or FDA, has indicated in RBIO’s preliminary discussions that a single pivotal trial may be adequate for approval if the strength of evidence is sufficiently robust.

Accordingly, before RBIO files the BLA supplement, RBIO will consider the totality of evidence from the PRESERVE-1 trial including the primary and secondary endpoints, exploratory clinical outcomes, biomarkers and the safety profile to determine the likelihood of FDA approval.

If this BLA supplement is approved, ATryn would be the first product approved in the United States for PE (weeks 24-28). RBIO also expects to seek orphan drug designation for this indication, which provides financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages, and FDA user-fee waivers and if RBIO receives the first FDA approval for this indication, the product may be entitled to orphan drug exclusivity.

Growth plan

RBIO is also in preclinical development of rhAAT, a recombinant human alpha-1 antitrypsin, for the treatment of hereditary emphysema.

RBIO has rights of first negotiation with Laboratoire français du Fractionnement et des Biotechnologies S.A., or LFB, the parent company of RBIO's sole stockholder LFB Biotechnologies S.A.S., or LFB Biotech, to market in the United States Wilfactin and Clottafact, two product candidates for bleeding disorders that are approved in Europe.

Dividend Policy

No dividends are planned.

Intellectual Property

RBIO currently holds four issued U.S. patents and two pending U.S. patent applications covering recombinant antithrombin, methods for its use and methods for its production.

These four patents and two patent applications belong to RBIO and are not subject to any license or sublicense with LFB USA. RBIO’s U.S. patents generally expire between 2015 and 2018. Patents that grant from RBIO’s pending U.S. patent applications would be expected to expire in 2033.

Competition

Thrombate III, which is marketed by Grifols S.A., or Grifols, is the only other commercially available antithrombin approved for sale in the United States.

Antithrombin products from European-sourced human plasma are not approved for sale in the United States.

As part of the orphan drug designation of ATryn, RBIO has been granted U.S. market exclusivity for seven years from February 2009 for the HD AT indication.

The orphan drug exclusivity for the HD AT indication will expire in February 2016. In addition, RBIO believes that ATryn is eligible for twelve years of data exclusivity in the United States pursuant to the BPCIA.

As such, RBIO believes that the FDA will be prohibited from approving an application for a biosimilar referencing the BLA for ATryn in the HD AT indication during the twelve years following the February 2009 approval date.

Grifols is also RBIO’s main competitor with respect to alpha-1 antitrypsin. In 2010, Talecris, which has since been acquired by Grifols, disclosed that sales of its Prolastin product were $351.5 million.

RBIO estimates that pAAT products in total currently generate worldwide annual sales in excess of $400.0 million. RBIO’s other competitors include Baxter International, which sells Aralast NP and Glassia, and CSL Behring, which sells Zemaira. Kamada is also currently conducting a Phase III study of aerosolized pAAT, assessing the safety and efficacy of nebulized AAT in the prevention of pulmonary function decline in patients with AAT deficiency.

5% stockholders

LFB Biotechnologies S.A.S.  100%

Use of proceeds

RBIO intends to use the $44 million in proceeds from its IPO as follows:

$39 million to fund clinical supply, RBIO’s third-party clinical research organization and other costs related to studying ATryn for the management of PE (weeks 24-28) in its PRESERVE-1 clinical trial and to conduct pre-commercial launch activities for ATryn to manage PE (weeks 24-28) prior to the completion of its PRESERVE-1 clinical trial; 

$3 million to increase its sales efforts, to develop physician education and for other marketing efforts to increase the use of ATryn as an antithrombin replacement therapy for the prevention of blood clots during or after surgery or childbirth for patients with HD AT; and the remaining proceeds, if any, to fund new and ongoing research and development activities, working capital, costs associated with operating as a public company and other general corporate purposes.