IPO Report: Valeritas (VLRX)

Francis Gaskins |

valeritas IPO, valeritas IPO price, valeritas IPO date, IPOs this week, stocks to buy now, small-cap stocksValeritas (VLRX)  is a commercial-stage medical technology company focused on developing innovative technologies to improve the health and quality of life of people with Type 2 diabetes.

VLRX is one of four new IPOs scheduled for this week. The full IPO calendar is available at IPOpremium.

VLRXscheduled a $75 million IPO on Nasdaq. At the price range mid-point of $15 the market capitalization is $240 million. 

The IPO is expected Friday, March 20, 2014. VLRX is based in Bridgewater, NJ. SEC filings

Manager, Joint-managers: Piper Jaffray; Leerink Partners

Co-managers: Oppenheimer

Valeritas IPO Overview

VLRX designed its first commercialized product, the V-Go Disposable Insulin Delivery Device, or V-Go, to help patients with Type 2 diabetes who require insulin to achieve and maintain their target blood glucose goals.

Valuation
Glossary

Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

             

Valeritas (VLRX)

$240

17.8

-3.2

4.5

4.5

31%

             

Valeritas IPO Conclusion

Neutral minus

P/E of -3.2, indicating very heavy cash burn relative to market cap

Revenue +219%

Price-to-sales of 18

Price-to-book of 4.5, relatively high

Valeritas Business

VLRX is a commercial-stage medical technology company focused on developing innovative technologies to improve the health and quality of life of people with Type 2 diabetes.

VLRX designed its first commercialized product, the V-Go Disposable Insulin Delivery Device, or V-Go, to help patients with Type 2 diabetes who require insulin to achieve and maintain their target blood glucose goals.

V-Go is a small, discreet and easy-to-use disposable insulin delivery device that a patient adheres to his or her skin every 24 hours.

V-Go enables patients to closely mimic the body’s normal physiologic pattern of insulin delivery throughout the day and to manage their diabetes with insulin without the need to plan a daily routine around multiple daily injections.

VLRX currently focuses on the treatment of patients with Type 2 diabetes—a pervasive and costly disease that, according to the 2014 National Diabetes Statistics Report released by the U.S. Centers for Disease Control and Prevention, or CDC, currently affects between 90% to 95% of the approximately 22 million U.S. adults diagnosed with diabetes.

The CDC estimates that the combined direct medical and drug costs and indirect lost productivity costs of diabetes in the United States are approximately $245 billion annually.

VLRX believes the majority of the 12.8 million U.S. adults treating their Type 2 diabetes with more than one daily oral anti-diabetic drug, or OAD, or an injectable diabetes medicine can benefit from V-Go’s innovative approach to Type 2 diabetes management.

Near-term Market

The near-term market consists of the approximately 5.8 million of these patients who currently take insulin, which includes 4.6 million patients who have not been able to achieve their target blood glucose goal.

Commercial sales

VLRX commenced commercial sales of V-Go in the United States during 2012.

During the first half of 2012, VLRX initiated an Early Access Program to provide a limited number of physicians with free V-Go products for patients and began shipments to major wholesalers in anticipation of commercial launch.

In the second half of 2012, VLRX began hiring sales representatives in selected U.S. markets.

At the end of 2014, the sales team covered 63 territories primarily within the East, South, Midwest and Southwest regions of the United States.

Since launching V-Go, the total number of prescriptions for, and the number of patients using, V-Go have increased each quarter.

Based on prescription data, VLRX estimates there were approximately 83,000 V-Go prescriptions filled during the year ended December 31, 2014, and VLRX estimates that approximately 13,000 patients with Type 2 diabetes were using V-Go as of December 31, 2014.

Distribution

VLRX generates revenue from sales of V-Go to third-party wholesalers and medical supply distributors that take delivery and ownership of V-Go and, in turn, sell it to retail pharmacies or directly to patients with Type 2 diabetes.

Valeritas Financial Overview

Revenue increased from $0.6 million in 2012 to $6.2 million in 2013 and to $13.5 million in 2014, reflecting territorial expansion.

Net loss was $87.6 million and $65.6 million for the years ended December 31, 2013 and 2014, respectively. Acumulated deficit as of December 31, 2014 was $310.7 million.

Valeritas Intellectual Property

As of February 19, 2015, VLRX owned 13 U.S. and 18 international issued patents and 10 U.S. and 56 international patents pending directed to various features of the commercial V-Go device and the  proprietary h-Patch drug delivery technology.

These patents are directed to the hydraulic drive for a basal-bolus delivery system as well as many of the other features of the h-Patch technology.

Valeritas Competition

Within the diabetes market, V-Go is cleared by the FDA for adult patients who require insulin, with either Type 1 or Type 2 diabetes, although VLRX positions V-Go to compete primarily in the market for adult patients with Type 2 diabetes requiring insulin, particularly as part of a basal-bolus insulin regimen.

Primary competitors in the basal-bolus insulin therapy market are manufacturers of insulin and insulin pens, such as Novo Nordisk, Sanofi S.A. and Eli Lilly and Company.

In addition to basal-bolus insulin therapy, glucagon-like peptide-1, or GLP-1, analog injection products are another potential competitor to V-Go. GLP-1 analog injection products are used in combination with OADs or basal insulin injection.

Some physicians, when faced with a patient who is unable to reach or maintain glucose levels at his or her goal with OADs, will add a GLP-1 through twice-daily, once-daily or once-weekly injections.

As a result, VLRX also competes with pharmaceutical manufacturers of GLP-1 analog injection products, such as AstraZeneca, Novo Nordisk and GlaxoSmithKline plc.

In addition, VLRX may compete with inhaled insulin products for bolus therapy, which have been recently introduced to the market.

In the area of basal-bolus device competition, VLRX does not consider programmable insulin pumps to be products that compete directly with V-Go, as those products, although cleared for both Type 1 and Type 2 diabetes, have been primarily designed and marketed for patients with Type 1 diabetes.

VLRX believes that the simple and discreet design and interface of the V-Go more directly addresses the needs of patients with Type 2 diabetes.

Patients with Type 2 diabetes, for example, are often taking many drugs for multiple diseases, including medications to treat high blood pressure and elevated cholesterol, and, as a result, they desire a simple to use and discreet method to deliver their insulin.

VLRX is not aware of any other disposable basal-bolus insulin delivery devices currently marketed or in development at this time.

Valeritas 5% shareholders pre-IPO

Valeritas Holdings, LLC 64%

Entities affiliated with Welsh, Carson, Anderson, & Stowe XI, L.P. 12%

Entities affiliated with Pitango Venture Capital 6%

Valeritas Dividends

No dividends planned

Valeritas IPO Use of Proceeds

VLRX currently anticipates that it will use $54 million of the net proceeds to support ongoing sales and marketing activities for V-Go and to expand sales and marketing infrastructure.

VLRX anticipates it will use $14 million of the net proceeds to fund research, development and engineering activities and manufacturing capabilities, to include the further development of pre-filled V-Go, although VLRX expects that it will need to seek additional capital to complete its development and commercialization.

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

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