Quick Take
Graybug Vision (GRAY) has filed to raise $75 million in an IPO of its common stock, according to an S-1 registration statement.
The company is developing treatments for diseases of the retina and optic nerve.
GRAY has achieved impressive Phase 2b trial results, and the IPO appears reasonably priced, so is worth consideration for patient life science investors.
Company & Technology
Redwood City, California-based Graybug was founded to advance a pipeline of treatment candidates for wet age-related macular degeneration, macular edema, diabetic retinopathy and primary open-angle glaucoma.
Management is headed by president and Chief Executive Officer Mr. Frederic Guerard, Pharm.D., who has been with the firm since February 2019 and was previously Worldwide Business Franchise Head of Ophthalmology at Novartis.
Below is a brief overview video of wet age-related macular degeneration:
Source: Novartis
The firm's lead candidate, GB-102, is currently being developed as a once every six months intravitreal injection for the treatment of wet age-related macular degeneration.
Management expects to publish Phase 2b trial topline data in the first half of 2021 and to initiate Phase 3 trials in the second half of 2021.
Below is the current status of the company's drug development pipeline:
Source: Company S-1 Filing
Investors in the firm have invested at least $131 million and include Deerfield, OrbiMed, Clarus Lifesciences, Hatteras Venture Partners, AffaMed Project and CVF 2018.
Market & Competition
According to a 2019 market research report, the global market for Wet AMD treatment reached $6.9 billion in 2018 and is forecast to grow to $10.4 billion by 2024. This represents a forecast CAGR (Compound Annual Growth Rate) of 7.1% from 2019 to 2024.
Key elements driving this expected growth are an increasing prevalence of AMD among an increasing aging population and growing awareness of treatment options.
Also, the market has two parts, intravenous delivery and intravitreal delivery. The intravitreal delivery option is expected to grow at a slightly faster rate of 7.2% through 2024.
Major competitive vendors that provide or are developing treatments include:
F. Hoffmann-La Roche
Kodiak Sciences (KOD)
Chengdu Kanghong Pharmaceutical Group
Opthea Limited (CKDXY)
Management says its lead candidate is being developed as 'an alternative to existing anti-VEFG (vascular endothelial growth factor) drugs, including Avastin, Lucentis, Eylea, and Beovu.'
Financial Status
Graybug's recent financial results are typical of clinical stage biopharma firms; they feature no revenue and substantial R&D and G&A expenses associated with its development activities.
Below are the company's financial results for the six months ended June 30, 2020:
Source: Company registration statement
As of June 30, 2020, the company had $17.5 million in cash and $7.2 million in total liabilities. (Unaudited, interim)
IPO Details
Graybug intends to raise $75 million in gross proceeds from an IPO of 4.7 million shares of its common stock at a proposed midpoint price of $16.00 per share.
No existing shareholders have indicated an interest to purchase shares at the IPO price, a common feature of life science IPOs.
Assuming a successful IPO, the company's enterprise value at IPO would approximate $288.9 million, excluding the effects of underwriter over-allotment options.
Management says it will use the net proceeds from the IPO as follows:
approximately $17.0 million to fund the development of GB-102, including $6.1 million for the completion of our ongoing Phase 2b clinical trial in wet AMD, $1.8 million for the initiation of our Phase 2b clinical trial in DME, $8.5 million for the initiation of our Phase 3 clinical trials in wet AMD, subject to the success of the Phase 2b trial, and $0.6 million for the initiation of our GB-401 Phase 1 clinical trial in glaucoma;
approximately $20.8 million to fund Chemistry, Manufacturing and Controls, or CMC, capital expenditures;
approximately $8.4 million to fund arrangements with contract manufacturing organizations to manufacture clinical material for our wet AMD and glaucoma clinical trials; and
any remaining amounts for working capital and general corporate purposes.
Management's presentation of the company roadshow is not available.
Listed bookrunners of the IPO are SVB Leerink, Piper Sandler, Needham & Company and Wedbush PacGrow.
Commentary
Graybug is seeking public funding to advance its lead candidate through Phase 2b trials and into the beginning of Phase 3 trials. The firm's lead candidate, GB-102, in its ADAGIO trial, resulted in '88% of patients who were previously treated with an average of eight injections annually were able to maintain stable central retinal thickness and visual acuity for six months or more with a single injection of 1 mg of GB-102.'
The market opportunity for treating wet AMD and related conditions of the optic nerve is large, with an estimated 76 million persons suffering from these diseases worldwide.
The firm has disclosed no research or major pharma firm collaborations to-date.
The company's investor syndicate includes top tier life science-focused venture capital firms OrbiMed and Clarus, a positive indicator.
As to valuation, management is asking IPO investors to pay an enterprise value of $289 million, at the lower end of the typical range for life science IPOs, so the IPO appears reasonably valued.
Graybug has produced intriguing Phase 2 trial results with plans to initiate Phase 3 pivotal trials in the second half of 2021.
For life science investors, the IPO presents a potential opportunity, but for patient investors with at least an 18- to 24-month hold time frame.
Expected IPO Pricing Date: September 24, 2020.
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