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IPO Report: Genocea Biosciences (GNCA)

February 1, 2014

Francis Gaskins

Genocea Biosciences ($GNCA) is a clinical stage biotechnology company that discovers and develops novel vaccines to address infectious diseases for which no vaccine or vaccines with limited effectiveness exist today. 13 other companies are scheduled to IPO this week. The full IPO calendar is available at IPOpremium.com GNCA scheduled a $72 million IPO with a market capitalization of $224 million at a price range midpoint of $13 for Wednesday, February 5, 2014 , on the Nasdaq. Manager, Joint managers: Citi , Cowen & Company Co-Managers: Stifel, Needham & Company SEC Documents Valuation Glossary Cash burn rate: when a company loses money with minimal depreciation & amortization (think biopharmas), the negative Price/Loss ratio is an indication of cash burn rate. The higher the loss the lower the absolute (negative) ratio. The lower the loss the higher the absolute (negative) ratio. Valuation Ratios Mrkt Price / Price / Price / Price / % offered annualizing Sept 9 mos Cap (mm) Sls Erngs BkVlue TanBV in IPO Genocea Biosciences (GNCA) $224 958.3 -12.0 3.1 3.1 32% Conclusion Positive: phase 1/2a trial, herpes vaccine, shareholders indicate buying, cash burn rate ok, see valuation below. Business GNCA is a clinical stage biotechnology company that discovers and develops novel vaccines to address infectious diseases for which no vaccine or vaccines with limited effectiveness exist today. GNCA uses its proprietary discovery platform, ATLAS, to rapidly design vaccines that act through T cell (or cellular) immune responses, in contrast to approved vaccines, which are designed to act primarily through B cell (or antibody) immune responses. GNCA believes that by harnessing T cells it can develop first-in-class vaccines to address infectious diseases where T cells are central to the control of the disease. Clinical trials In September 2013 , GNCA announced human proof-of-concept data for GEN-003, a candidate therapeutic vaccine, or immunotherapy, that it is developing to treat herpes simplex virus-2, or HSV-2, infections. These data from GNCA's ongoing Phase 1/2a trial represent the first reported instance of a vaccine significantly reducing viral shedding, an indicator of disease activity in HSV-2. If GEN-003 successfully completes clinical development and is approved, GNCA believes it would represent an important new treatment option for patients with HSV-2. GNCA is also developing a second T cell vaccine candidate, GEN-004 for pneumococcus, a leading cause of infectious disease mortality worldwide. GNCA has initiated a Phase 1 trial for GEN-004, which it anticipates completing by mid-2014. This Phase 1 trial is designed to demonstrate the T cell response associated with natural protection against pneumococcus. If this trial is successful, GNCA plans to conduct a Phase 2 clinical trial to seek to demonstrate that GEN-004 can reduce pneumococcus in humans by mid-2015. Intellectual property GNCA's discovery platform patent portfolio includes three patent families, currently comprising four issued U.S. patents and two pending U.S. applications. GNCA holds an exclusive license from The Regents of the University of California to the first patent family, including U.S. Patent 6,004,815 and the related U.S. Patents 6,287,556 and 6,599,502. This first family includes claims to fundamental aspects of the ATLAS platform, developed by the scientific founder, Darren Higgins , Ph.D. while he was employed at the University of California, Berkeley . Patents in this family have a patent term until August 2018 . Competition There are other organizations working to improve existing therapies or to develop new vaccines or therapies for GNCA's initially selected indications. Depending on how successful these efforts are, it is possible they may increase the barriers to adoption and success of GEN-003 and GEN-004 product candidates, if approved. These efforts include the following: ** HSV-2: The current standard of care for the treatment of HSV-2 is valacyclovir, an oral antiviral medicine. Other currently approved oral antiviral medications include acyclovir and famciclovir. AiCuris, a private company based in Germany , is developing a new oral antiviral, pritelivir, and has advanced the compound into Phase 2 testing. GNCA understands the company will pursue once-weekly dosing with this drug. GNCA believes that GEN-003 may offer advantages in terms of improved symptom control, reduced disease transmission risk and improved compliance when compared to oral antivirals. There are also several companies attempting to develop new therapeutic vaccines against HSV-2, including Agenus Inc. , Coridon Pty Ltd , Sanofi Pasteur and Vical Incorporated . GNCA believes GEN-003 has advantages against each of the vaccines being developed by these companies based on the screens of human protection that GNCA has conducted using ATLAS that include these competitors' antigens, published reports of preclinical vaccine efficacy, announced clinical results in the case of Agenus, Inc. and our own clinical results to date. ** Pneumococcus: The current standard of care for the prevention of pneumococcus is Prevnar-7/Prevenar-13, marketed by Pfizer. In select countries, Synflorix, marketed by GlaxoSmithKline , is also widely accepted. Additionally, Pneumovax-23, marketed by Merck, is labeled by use for persons over 65. GNCA believes that each of these companies is seeking to develop improvements to their product. GNCA believes these represent incremental improvements, adding a few additional strains to their coverage. In addition, GNCA is aware of a pneumococcus vaccine that Sanofi Pasteur has taken into Phase 1 trials. This is a protein subunit vaccine designed to cover all strains of pneumococcus, but was designed to induce B cell responses. For many pneumococcal strains with dense sugars on their surface, the protein targets of the antibodies induced by the vaccine will be blocked by sugars that cover them. GNCA believes that by covering all known pneumococcus serotypes, with a T cell-based mechanism of action that complements existing vaccines, GEN-004 may offer broader protection than existing vaccines. ** Many of GNCA's competitors, such as Merck, GlaxoSmithKline , and Sanofi Pasteur , either alone or with their strategic partners, have substantially greater financial, technical and human resources than GNCA does and significantly greater experience in the discovery and development of product candidates, obtaining FDA and other regulatory approvals of vaccines and the commercialization of those vaccines. 5% stockholders Polaris Venture Partners , and related funds 16.3% Lux Ventures , and related funds 14.8% S.R. One, Limited 13.0% Johnson & Johnson Development Corporation 11.7% CVF, LLC 9.3% Skyline Venture Partners V, L.P. 8.8% Cycad Group, LLC 6.6% Auriga Ventures , III FCPR 6.5% Bill & Melinda Gates Foundation 6.2% Use of proceeds GNCA expects to net $63.8 million from its IPO. Proceeds are allocated as follows: $30 million to fund research, manufacturing and clinical development in connection with GNCA's ongoing Phase 1/2a clinical trial and two planned Phase 2 clinical trial studies for GEN-003; $10.5 million to fund research and development expenses in connection GNCA's Phase 1 clinical trial and its planned Phase 2a clinical trial for GEN-004; $5.5 million to fund research and development and manufacturing of GNCA's prophylactic chlamydia, HSV-2 and malaria programs to finalize the vaccine candidates, advance the candidates through preclinical toxicology and file an IND; and the remainder for working capital and other general corporate purposes.


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