Quick Take
Virios Therapeutics (VIRI) intends to raise $30 million from the sale of its common stock in an IPO, according to an amended registration statement.
The company is developing a drug treatment candidate for fibromyalgia, a painful nervous system condition.
VIRI has produced intriguing early proof of concept efficacy results and the IPO appears priced reasonably.
For life science investors with an 18 to 24 month hold time frame, the IPO is worth a closer look.
Company & Technology
Alpharetta, Georgia-based Virios was founded to develop its IMC-1 candidate designed to inhibit HSV-1 (Herpes Simplex Virus) activation which may play a role in fibromyalgia symptoms.
Management is headed by Chief Executive Officer Mr. Greg Duncan, who has been with the firm since April 2020 and was previously president and CEO of Celtaxys, an anti-inflammatory biotech company.
Below is a brief overview video of fibromyalgia:
Source: Medical Centric
The firm’s sole program, IMC-1, is designed to inhibit viral replication and has produced a ‘statistically significant reduction in a double-blinded, placebo-controlled, randomized Phase 2a proof-of-concept study in FM (FibroMyalgia) patients.’
Investors in the firm have invested at least $12.6 million and include The University of Alabama.
Market & Competition
According to a 2018 market research report by Coherent Market Insights, the global market for fibromyalgia treatments was an estimated $2.8 billion in 2018.
The market is forecast to grow at a CAGR (Compound Annual Growth Rate) of 3.3% from 2018 to 2026.
Key elements driving this expected growth are the number of drugs in Phase 2 and Phase 3 stages of development and continued demand among patients for treatments.
Also, the chart below shows that the North America region is expected to account for 51% of total global demand by 2026:
Major competitive vendors that provide or are developing treatments include:
-
Eli Lilly (LLY)
-
Pfizer (PFE)
-
Novartis (NVS)
-
Allergan (GAN)
-
Sun Pharmaceutical Industries (OTCPK:SMPQY)
-
Aptinyx (APTX)
-
Prismic Pharmaceuticals
-
Innovative Med Concepts
-
Intec Pharma (NTEC)
-
Astellas Pharma (OTCPK:ALPMF)
Financial Status
Virios’ recent financial results are typical of a clinical stage biopharma firm in that they feature no revenue and R&D and G&A expenses associated with its program development.
Below are the company’s financial results for the past two and ½ years (Audited PCAOB for full years):
Source: Company registration statement
As of June 30, 2020, the company had $1 million in cash and $7.3 million in total liabilities. (Unaudited, interim)
IPO Details
VIRI intends to sell 3 million shares of common stock at a midpoint price of $10.00 per share for gross proceeds of approximately $30.0 million, not including the sale of customary underwriter options.
No existing shareholders have indicated an interest to purchase shares at the IPO price, a typical feature of life science IPOs.
Assuming a successful IPO at the midpoint of the proposed price range, the company’s enterprise value at IPO would approximate $77.3 million.
Excluding effects of underwriter options and private placement shares or restricted stock, if any, the float to outstanding shares ratio will be approximately 38.3%.
Per the firm’s most recent regulatory filing, it plans to use the net proceeds as follows:
Conduct and complete the IMC-1 FM Phase 2b trial: This landmark trial will assess further optimized doses of IMC-1 and inform our Phase 3 program approach.
Conduct and complete the IMC-1 chronic toxicology studies: Following on from our successful short-term toxicology studies, we will execute the required longer-term toxicology studies to support chronic administration of IMC-1 following our Phase 2b trial.
Manufacture investigational drug for the Phase 2b study and for the chronic toxicology study. Refine clinical manufacturing process to conform with commercial standards to ensure if Phase 2b is successful and prepare to progress to Phase 3.
Prepare and design Phase 2 IBS proof of concept study to expand the IMC-1 value proposition beyond FM.
Management’s presentation of the company roadshow is not available.
The sole listed underwriter of the IPO is ThinkEquity.
Commentary
Virios is seeking public capital market funding for its single program as it pursues Phase 2b trials for its fibromyalgia [FM] pain treatment candidate.
IMC-1 has shown a ‘statistically significant’ reduction in viral replication in a proof-of-concept test in patients with FM.
The drug is really a proprietary combination of two already-approved drugs, Famciclovir and Celecoxib.
The firm says that IMC-1 has been granted US FDA fast track review status.
The market opportunity is in the multiple of billions and expected to grow at a moderate rate in the near future.
Management has disclosed no big pharma research or commercial collaborations.
As to valuation, the IPO is valued at significantly below the typical range for a biopharma firm at IPO.
Given the early proof of concept efficacy results, fast track status and relatively low IPO valuation assumption, for life science investors with a hold time frame of at least 18 to 24 months, the IPO is worth a close look.
Expected IPO Pricing Date: To be announced.
Gain Insight and actionable information on U.S. IPOs with IPO Edge research.
Members of IPO Edge get the latest IPO research, news, and industry analysis. Get started with a free trial!
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Editor’s Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.
