ProQR Therapeutics B.V. (NASDAQ:PRQR) -- Scheduled IPO, September 18,2014
Overview
PRQR is an innovative biopharmaceutical company engaged in the discovery and development of RNA-based therapeutics for the treatment of severe genetic disorders, including a disease modifying therapy for the treatment of cystic fibrosis. PRQR has had positive preclinical results and plans to file in Q4 2014an IND (investigational new drug) with the FDA.
During August 2014, PRQR entered into an agreement with Cystic Fibrosis Foundation Therapeutics to provide PRQR with up to $3 million to support the clinical development of QR-010, the lead product. Based in Boston, MA,ProQR Therapeutics B.V. (PRQR) scheduled a $76 million IPO on NASDAQ with a market capitalization of $294 million at a price range midpoint of $12 for Thursday, September 18, 2014.
- SEC Documents Manager, Co-managers: Leerink Partners, Deutsche Bank Securities
- Joint-managers: JMP Securities, H.C. Wainwright & Co., LLC
Conclusion
The rating on PRQR is neutral to slightly positive. PRQR has had positive preclinical results for cystic fibrosis. Plans to file in Q4 2014 an IND (investigational new drug) with the FDA. Certain insiders have indicated an interest in purchasing up to $20mm on the IPO.
To put the conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced above.
Valuation Glossary
Valuation Ratios
- Mrkt Cap ($mm) $294
- Price /Sls n/a
- Price /Erngs -16.3
- Price /BkVlue : 2.6
- Price /TanBV : 2.2
- % offered in IPO: 26%
Business
PRQR is an innovative biopharmaceutical company engaged in the discovery and development of RNA-based therapeutics for the treatment of severe genetic disorders. Utilizing unique, proprietary RNA repair technologies, PRQR believes it will be able to treat genetic disorders in which a single protein is defective due to certain types of genetic mutations.
PRQR designs its therapeutic candidates to specifically target and repair the defective messenger RNA, or mRNA, that is a product of a mutated gene in order to restore the expression and function of normal, or wild-type, protein. PRQR's primary focus is on the development of a disease modifying therapy for the treatment of cystic fibrosis, or CF, a genetic disease that affects an estimated 70,000 to 100,000 patients worldwide and causes early morbidity and mortality. CF is a genetic disease that currently has no cure. The median age of death for CF patients is 27, and more than 90% of CF patients die from respiratory failure.
To date, all but one of the therapies approved to treat CF patients are designed to treat the symptoms of the disease rather than address the underlying cause. CF results from mutations in the gene that encodes a protein called cystic fibrosis transmembrane conductance regulator, or CFTR. Although there are more than 1,900 different genetic mutations that cause CF, the DF508 mutation that PRQR is targeting is the most prevalent and is present in approximately 70% of all CF patients.
PRQR is also developing a treatment for Leber’s Congenital Amaurosis, or LCA, the leading genetic cause of blindness in childhood. Further, based its own research and initial selection criteria, PRQR believes that its RNA repair technologies can potentially be used to treat a broad range of other severe genetic diseases that are currently untreatable or have limited effective treatment options and have to date identified more than 50 potential target indications.
Lead product candidate
PRQR's lead product candidate, QR-010, has generated compelling data in pre-clinical studies, which PRQR believes supports its potential as a disease modifying therapy for CF patients. PRQR intends to advance QR-010 into clinical trials in CF patients with the DF508 mutation, which affects approximately 70% of all CF patients. In the fourth quarter of 2014, PRQR plans to file an IND (investigational new drug) with the FDA, file a CTA with the EMA and initiate the first clinical trial directly in CF patients.
PRQR is also studying applications of RNA repair technologies for mutations other than DF508 that could potentially be used to treat an additional 10% of CF patients, including those with the G551D mutation.
Cystic Fibrosis Foundation Therapeutics, Inc. agreement
In August 2014, PRQR entered into an agreement with Cystic Fibrosis Foundation Therapeutics, Inc., or CFFT, a subsidiary of the Cystic Fibrosis Foundation, pursuant to which CFFT agreed to provide PRQR with up to $3 million to support the clinical development of QR-010.
The Cystic Fibrosis Foundation is a professional patient advocacy organization that supports select CF drug development programs by providing financial support and access to its Therapeutic Development Network, a network of CF key opinion leaders, as well as to an extensive clinical trial network infrastructure.
Pursuant to the terms of the agreement, PRQR is obligated to make a one-time milestone payment to CFFT of up to approximately $80 million, payable in three equal annual installments following the first commercial sale of QR-010, the first of which is due within 90 days following the first commercial sale.
PRQR is also obligated to make a one-time milestone payment to CFFT of up to $3 million if net sales of QR-010 exceed $500 million in a calendar year. Lastly, PRQR is obligated to make a payment to CFFT of up to approximately $6 million if PRQR transfers, sells or licenses QR-010 other than for certain clinical or development purposes, or if PRQR enters into a change of control transaction.
Financing
To date, PRQR has financed operations primarily through private placements of equity securities, and to a lesser extent from funding from governmental bodies and patient organizations, including Cystic Fibrosis Foundation Therapeutics, Inc., or CFFT, a subsidiary of the Cystic Fibrosis Foundation.
From inception on February 21, 2012 through June 30, 2014, PRQR raised gross proceeds of approximately €45.6 million from private placements of equity securities, including €2,500,000 from the conversion of a convertible loan, €2,588,000 in loans from a governmental body and approximately €143,000 in grants from patient organizations.
As of June 30, 2014, PRQR had cash and cash equivalents of €38,193,000. To date, we have not generated any revenues from royalties or product sales. Based on our current plans, we do not expect to generate royalty or product revenues for the foreseeable future.
Intellectual property
Patent Rights Relating to PRQR's Cystic Fibrosis Program: With regard to the lead product candidate, QR-010, PRQR owns an international patent application filed under the Patent Cooperation Treaty, or PCT, relating to certain aspects of PRQR's RNA repair technology platform, including method of use claims relating to the use of certain single stranded oligonucleotides, particularly modified RNA oligonucleotides, for making a change in the sequence of a target RNA molecule in a living cell, as well as composition of matter claims relating to PRQR's QR-010 product candidate.
The term of any patents resulting from this application, if issued, would be expected to extend to July 2033. In addition, in May 2012, PRQR entered into an exclusive license agreement with Massachusetts General Hospital, or MGH, to obtain rights to a patent family with claims directed to an alternative RNA repair platform that uses an RNA oligonucleotide complex rather than a single stranded oligonucleotide.
This patent family includes an issued U.S. patent with a composition of matter claim directed to an RNA oligonucleotide complex containing two specific oligonucleotide sequences for modulating the expression or activity of a CFTR gene product, and an allowed U.S. patent application with method of use claims relating to the treatment of a symptom of cystic fibrosis in a subject by administering to the subject an RNA oligonucleotide complex comprising two oligonucleotides, as well as a composition of matter claim directed to a specific RNA complex for modulating the activity of a CFTR gene product.
The issued and allowed claims, however, cover elements of PRQR's RNA repair technologies, but may not cover the QR-010 product or its use. The term of the issued U.S. patent is expected to extend to October 2027, and the allowed U.S. application, when and if issued, would be expected to extend to March 2025.
In addition, PRQR has rights in a pending U.S. patent application in which it will pursue composition of matter claims relating to QR-010. The term of any patent resulting from this application, if issued, would be expected to extend to March 2025.
Patent Rights Relating to PRQR's LCA Program: With regard to the LCA Program, in April 2014, PRQR entered into an exclusive license agreement with the Radboud University Medical Center, Nijmegen, the Netherlands, to obtain rights in a patent family with composition of matters claims directed to certain antisense oligonucleotides for treating LCA and method of use claims relating to modulation of the splicing of the CEP290 gene product.
Patent applications currently are pending in the U.S. as well as Brazil, Canada, Australia, Europe, and Eurasia. The term of any patents resulting from these applications, if issued, would be expected to extend to 2032.
Competition
PRQR believes that a significant number of products are currently under development, and may become commercially available in the future, for the treatment of conditions for which PRQR may try to develop product candidates. PRQR ise aware of multiple companies that are working in the field of CF therapeutics, including major pharmaceutical companies such as Vertex Pharmaceuticals Inc (NASDAQ:VRTX), F. Hoffmann-LaRoche Ltd., Novartis (NYSE:NVS), Gilead Sciences Inc (NASDAQ:GILD), Abbott Laboratories (NYSE:ABT), Targeted Genetics, Pfizer Inc (NYSE:PFE) and Bayer AG NA (XETRA:BAYGN).
If PRQR's lead product candidate, QR-010, is approved for the indications currently being pursued, it will compete with a range of therapeutic treatments that are either in development or currently marketed. For example, Vertex’s Kalydeco is approved for use by the FDA and works to improve the function of the defective CFTR protein in CF patients with the G551D mutation and certain other gating mutations. Vertex is currently seeking marketing approval for additional mutations, which would increase Kalydeco’s target population to up to 10% of the total CF patient population. Vertex is also developing lumacaftor (VX-809), which is intended for a much broader CF patient population, including patients who are homozygous for the DF508 mutation.
In June 2014, Vertex announced that its two Phase 3 clinical trials of lumacaftor, when used in combination with Kalydeco in CF patients homozygous for the DF508 mutation, showed statistically significant improvement in the study’s primary endpoint of improved lung function, compared to placebo.
Clinical trial results are considered statistically significant when the probability of the results occurring by chance, rather than from the efficacy of the drug candidate, is sufficiently low.
When that probability is less than 5%, or pOther signs of clinical improvement were either limited or not statistically different from placebo.
PRQR believes these studies validate that DF508 CFTR is a treatable target and indicate there is need for more efficacious therapies.
There are also a number of products that are marketed or in clinical development for the treatment of symptoms manifested in CF patients. These treatments include inhaled antibiotics, mucus thinners, pancreatic enzymes and anti-inflammatory drugs.
5% shareholders pre-IPO
- Sofinnova Capital VII FCPR, 17.5%
- Entities affiliated with Fidelity Select Portfolios: Biotechnology Portfolio, 11.5%
- Appel B.V., 8.25%
- Vogelgezang B.V., 7%
- Jennison Global Healthcare Master Fund, Ltd., 6.5%
- Progress Therapeutics B.V., 7%
- J.H.J. Voskamp Participaties B.V., 5.4%
- Cooperatieve Gilde Healthcare III Sub-Holding 2 U.A., 5.4%
Use of proceeds
PRQR expects to net $67.5mm from its IPO. Proceeds are allocated as follows:
- $33.3 million (€25.2 million) to fund development costs associated with our planned Phase 1b clinical trial and POC trial for QR-010;
- $32.2 million (€24.4 million) to fund development costs associated with our planned Phase 2a clinical trials for QR-010;
- $12.0 million (€9.1 million) to fund development costs associated with pre-clinical studies and related activities for QR-110; and
- the remainder for discovery and other pipeline projects, as well as for working capital and other general corporate purposes and potentially for acquisitions or investments in other businesses, technologies or product candidates.
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