News Column

IPO Report: ZS Pharma (ZSPH)

June 16, 2014

Francis Gaskins

ZS Pharma ($ZSPH) is a biopharmaceutical company focused on the development and commercialization of highly selective, non-absorbed drugs to treat renal, cardiovascular, liver and metabolic diseases. It is headquartered in Coppell, TX.

Eleven other companies are scheduled for the week of June 16, 2014.  The complete IPO calendar is available at IPOpremium.

The manager and joint managers are J.P. Morgan and Credit Suisse.  The co-managers are BMO Capital Markets and William Blair

ZSPH scheduled an $80 million IPO with a market capitalization of $300 million at a price range midpoint of $16 for Wednesday, June 18, 2014 on the Nasdaq.  SEC Filings

ZS PHarma IPO Report

Overview



ZSPH is a biopharmaceutical company focused on the development and commercialization of highly selective, non-absorbed drugs to treat renal, cardiovascular, liver and metabolic diseases.

ZSPH's initial focus is on the development of ZS-9, its product candidate in Phase III development for the treatment of hyperkalemia, a life-threatening condition in which elevated levels of potassium in the blood (greater than 5.0 mEq/L) increase the risk of muscle dysfunction, including cardiac arrhythmias and sudden cardiac death.

ZSPH is aware of one other company, Relypsa (RLYP) , which is developing a potassium removal drug that is currently in Phase III clinical development. Relypsa has a market cap of $759 million.

Valuation



Glossary



Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO



annualizing Q1'14

         


ZS Pharma (ZSPH)

$300

no rev

-7.1

3.1

3.1

27%

             

Conclusion



The rating on ZSPH is neutral.

Business



ZSPH is a biopharmaceutical company focused on the development and commercialization of highly selective, non-absorbed drugs to treat renal, cardiovascular, liver and metabolic diseases.

ZSPH's proprietary zirconium silicate technology allows ZSPH to create highly selective ion traps that can reduce toxic levels of specific electrolytes without disturbing the balance of other electrolytes.

Initial focus



ZSPH's initial focus is on the development of ZS-9, its product candidate in Phase III development for the treatment of hyperkalemia, a life-threatening condition in which elevated levels of potassium in the blood (greater than 5.0 mEq/L) increase the risk of muscle dysfunction, including cardiac arrhythmias and sudden cardiac death.

ZSPH is advancing ZS-9 through clinical development with the goal of obtaining approval for the treatment of acute and chronic hyperkalemia, regardless of the underlying disease state.

Regulatory strategy



ZSPH designed its development program based on input from the United States Food and Drug Administration, or FDA, and European Medicines Agency, or EMA, and plan to submit its New Drug Application, or NDA, in the United States and its Marketing Authorization Application, or MAA, in Europe in the first half of 2015.

If ZSPH receives regulatory approval, it intends to commercialize ZS-9 for the treatment of hyperkalemia in the United States with its specialty sales force targeting nephrologists and cardiologists and intend to seek one or more partners for commercialization in markets outside of the United States.

Clinical studies



ZSPH has completed two clinical studies with ZS-9 that together enrolled 843 patients with hyperkalemia, including patients with chronic kidney disease, or CKD, heart failure, or HF, diabetes and those on renin-angiotensin aldosterone system, or RAAS, inhibitor therapy.

ZSPH's first in man study, ZS002, was completed in May 2012 and its first Phase III study, ZS003, was completed in November 2013. Both trials met their pre-specified primary and secondary efficacy endpoints with clinically meaningful and statistically significant results.

ZSPH initiated a second Phase III study, ZS004, in the first quarter of 2014, and will initiate a long term safety study, ZS005, in the second quarter of 2014. Upon successful completion of ZS004, ZSPH expects to file its NDA with the FDA and its MAA with the EMA.

Potassium selectivity



ZS-9 is an insoluble, non-absorbed zirconium silicate with a clearly defined three dimensional crystalline lattice structure that was designed and engineered to preferentially trap potassium ions.

Sodium polystyrene sulfonate, or SPS (e.g., Kayexalate), the current standard of care for hyperkalemia in the United States, is a nonselective polymer resin. In contrast to nonselective polymer resins, the potassium selectivity of ZS-9 enables high in-vitro binding capacity for potassium ions even in the presence of other ions.

Dividend Policy



No dividends are planned.

Intellectual Property



ZSPH has licensed certain patent rights relating to zirconium silicates from UOP. These patents include claims covering ZS-9 and methods of oral administration of ZS-9.

During its development of ZS-9, ZSPH has made certain improvements to the ZS-9 composition.

For example, ZSPH  found that reducing the level of ZS-9 particles with a particle size below 3 microns that are contained in a composition was advantageous for avoiding systemic exposure during oral administration. ZSPH also found that the ZS-9 production method can be controlled to reduce the levels of more soluble forms of zirconium silicate impurities, such as ZS-8, in the composition.

ZSPH has filed several non-provisional and provisional patent applications directed to these improvements and other novel zirconium silicate compositions, methods of treating various indications with ZS-9, and methods of manufacturing ZS-9.

Competition



Other companies are developing drugs for the treatment of hyperkalemia.

ZSPH is aware of one other company, Relypsa, which is developing a potassium removal drug that is currently in Phase III clinical development.

ZSPH does not know whether these drugs will be introduced to the market and if so, the timing or success of such introduction.

However, in the event that Relypsa, or other companies developing treatment options for hyperkalemia, are successful, ZSPH will face additional competition for ZS-9.

5% stockholders



Alta Partners VIII, L.P.              21.73%

Entities affiliated with Devon Park Bioventures, L.P.       17.40%

Entities affiliated with 3x5 Special Opportunity Fund, L.P. 15.70%

Entities affiliated with John Dyett           11.71%

Use of proceeds



ZSPH expects to net $72 million from its IPO. Proceeds are allocated as follows:

$3.0 million to complete its ongoing Phase III (ZS004) clinical trial;

$9.0 million to advance its planned long-term safety trial, ZS005, through the end of 2015;

$5.0 million to seek FDA, EMA and other international approvals to market ZS-9 for the treatment of hyperkalemia;

$18.0 million to fund the scale-up of its manufacturing facilities for ZS-9 for commercial launch;

$29.0 million to build a specialty sales force infrastructure and to complete pre-commercialization marketing activities for ZS-9 in the United States; and

the balance for working capital and other general corporate purposes.


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Source: Equities.com


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