IPO Report: XBiotech (XBIT)

Francis Gaskins |

XBiotech.jpg

XBiotech (XBIT) is a clinical-stage biopharmaceutical company engaged in discovering and developing “True Human™” monoclonal antibodies for treating a variety of diseases. It is based in Austin, TX.

Six other companies are scheduled for the week of April 13. The full IPO calendar is available at IPO Premium.

Manager, Joint-managers: WR Hambrecht + Co
Co-managers: None

XBiotech Summary

XBIT scheduled a $76 million IPO with a market capitalization of $609 million at a price range midpoint of $19 for Wednesday, April 15, 2015 on Nasdaq. SEC filings

XBiotech Valuation

Glossary

Accumulated deficit (mm)

.

.

-$93

     

Per share dilution

.

.

-$14.88

     
             

Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

Xbiotech

$602

no rev

-27.4

4.6

4.6

13%

             

XBiotech Conclusion

Neutral

Monoclonal antibodies

Dependent on two Phase 3 clinical studies to be completed in '15 & '16

P/E of -27, indicated moderate to low cash burn rate  relative to market cap

4.6 times book

Shareholders not buying

No strategic partners

Impressive board of directors, see below

XBiotech Business

XBIT is a clinical-stage biopharmaceutical company engaged in discovering and developing “True Human™” monoclonal antibodies for treating a variety of diseases.

XBiotech Market

By 2019, global sales of monoclonal antibodies (MAbs) are forecast to top $122 billion, up from $63 billion in 2013. Moreover, five of the 10 bestselling biotechnology drugs in the U.S. during 2013 were therapeutic MAbs, each with annual sales over $6 billion.

XBiotech Board of Directors

Includes the former CEO/chairman of Novartis, Dr. Vasella, who has been ranked among Europe’s and the world’s most influential leaders by both Time and the Financial Times; the former EVP of operations at Amgen, Dr. Bonanni; and Thorpe McKenzie, co-founder of Tiger Management (TIGER fund)

XBiotech True Human

True Human™ monoclonal antibodies are those which occur naturally in human beings—as opposed to being derived from animal immunization or otherwise engineered.

XBIT believes that naturally occurring monoclonal antibodies have the potential to be safer and more effective than their non-naturally occurring counterparts.

While focused on bringing XBIT’s lead product candidate to market, XBIT also has developed a “True Human™” pipeline and manufacturing system.

MABp1 also known as Xilonix™

The majority of XBIT’s efforts to date have been concentrated on developing MABp1 (also known as Xilonix™, CA-18C3, CV-18C3, RA-18C3, and T2-18C3), a therapeutic antibody which specifically neutralizes interleukin-1 alpha (IL-1a).

IL-1a is a pro-inflammatory protein produced by leukocytes and other cells, where it plays a key role in inflammation.

When unchecked, inflammation can contribute to the development and progression of a variety of different diseases such as cancer, vascular disease, inflammatory skin disease, and diabetes.

XBIT’s clinical studies have shown that blocking IL-1a with MABp1 may have a beneficial effect in several diseases.

XBiotech Phase I/II Clinical Trial

XBIT completed a Phase I/II clinical trial for MABp1 (Xilonix™) as a treatment for cancer at MD Anderson Cancer Center.

The results of this study, published in Lancet Oncology in April 2014, found that in the 52 patients with metastatic cancer (18 tumor types) who participated, MABp1 was well tolerated, with no dose-limiting toxicities or immunogenicity.

Moreover, within eight weeks of starting therapy many patients began to improve with respect to constitutional symptoms.

An imaging method, known as dual energy X-ray absorptiometry (DEXA), revealed that many of the patients improved physically, in terms of gaining lean body mass; and patient reported outcomes documented that many were recovering from pain, fatigue and appetite loss.

Finally, XBIT found that in the patients with colorectal cancer, DEXA-measured recovery was associated with significant improvement in survival.

XBiotech FDA Fast Track

XBIT received a fast track designation from the FDA in October 2012 to develop Xilonix™ as a treatment in the setting of metastatic colorectal cancer.

The purpose of the fast track designation is to aid in the development, and expedite the review, of drugs that have the potential to treat a serious or life-threatening disease.

XBiotech Two Phase III Studies

Currently XBIT has two Phase III studies underway — one launched in the United States for advanced refractory colorectal cancer and another in Europe for symptomatic colorectal cancer, which are scheduled for completion in 2015 and 2016,

If these trials are successful, XBIT will seek marketing approvals for MABp1 (Xilonix™) in Europe and/or in the United States.

Assuming such marketing approvals are obtained, XBIT would distribute and sell this product through its own direct sales force or with a commercial partner.

XBiotech Manufacturing

XBIT began construction on a new, 42,000-square-foot manufacturing facility in Austin, Texas, that is intended to accommodate large-scale commercial production.

XBiotech estimates total costs for construction to be in the range of only roughly $10 million to $12 million due to its low-infrastructure manufacturing technologies.

XBiotech Intellectual Property

XBIT has developed a large international intellectual property (IP) portfolio to protect important aspects of its technology, services and products.

XBIT’s IP portfolio includes patents, trademarks and trade secrets.

To date, XBiotech’s patent portfolio consists of 16 patent families, and includes 39 issued/allowed patents and approximately 100 pending patent applications in various countries around the world.

XBiotech’s IP portfolio is designed to protect XBiotech’s biologic drug products, therapies and to some extent, its discovery technology.

It includes patents and applications that protect MABp1 as a composition of matter and methods of using anti-IL-1a antibodies for the treatment of various diseases including cancer, vascular disorders, inflammatory skin diseases, diabetes, and arthritis.

XBiotech’s IP portfolio also includes patents and applications directed to some aspects of its proprietary antibody discovery platform, as well as treating Staphylococcus aureus (S. aureus) infections.

XBiotech Competition

There continues to be a highly active commercial pipeline of therapeutic antibodies globally, involving a complex array of development cycles as products reach the end of their patent life and as new candidate products proceed into pivotal studies and approach registration.

While there are numerous independent reviews on the subject in both trade journals and academic press, XBiotech has analyzed and attempted to synthesize these publicly available data in order to understand, at least at the broadest level, the competitive landscape for its products.

While XBIT believes True Human™ therapeutic antibodies are an important positive differentiating factor from other monoclonal antibodies currently marketed, XBIT also believes the unique activity of its anti-cancer therapeutic Xilonix™, which is being tested for its ability to both improve well being and extend life, if proven in XBIT’s Phase III clinical programs, will be highly differentiated in the market place for colorectal cancer therapeutics.

However, regardless of the potential advantages or uniqueness of Xilonix™ in the market, XBIT does nevertheless expect these products to compete head-to-head with the numerous existing candidate antibody products in development, including emerging biosimilar therapeutic antibodies.

XBiotech 5% Shareholders Pre-IPO

John Simard     23.22%

W. Thorpe McKenzie      14.40%            

XBiotech Dividends

No dividends are planned.

XBiotech Use of Proceeds

XBIT expects to receive $71 million from its IPO and use it for the following:

$30 million to complete its Phase III trials for Xilonix™ in the United States and in Europe;

$12 million on plant and equipment infrastructure to complete the manufacturing and R&D facilities under construction, and;

$4 million to complete a Phase I/II study for a treatment for S. aureus infections;

$2 million to complete XBIT’s Phase II PG study; 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

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