IPO Outlook: Inotek's Vision for the Future

Inotek Pharmaceuticals CorpITEK, founded in 1999, is a clinical-stage biopharmaceutical company centered on the discovery, development and commercialization of therapies to treat glaucoma. Glaucoma is condition where the eye is unable to properly drain fluid, which leads to a buildup of pressure in the optic nerve and gradual loss of vision. The company is pioneering a small molecule drug that’s delivered by eye drops and taken once a day to regulate the eye’s natural pressure control mechanism.

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Eyeing Glaucoma’s Market Potential

Glaucoma can affect patients of all ages and ethnicities. According to the Archives of Ophthalmology, the disease’s prevalence rate increases with age. As noted in the British Journal of Ophthalmology, there were an estimated 2.8 million Americans with glaucoma in 2010, with growth to 3.4 milllion by 2020. Out of all glaucoma-gelated prescriptions, two-thirds contain Iatanoprost. Inotek’s flagship drug contains, trabodenoson, significantly improves the performance of Iatanoprost, which reduces the need for additional medications like beta-blockers and alpha agonists that can negatively affect the eye.

Inotek is close to completing Phase 2 clinical testing requirements by the FDA and is moving on the critical Phase 3 testing, which should conclude in 2017. The company’s patent portfolio covers the trabodenoson compound and lasts till 2026 in the U.S., Europe, Japan and several other countries.

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Experienced Management

CEO David Southwell has over 20 years of specialty pharmaceuticals and biotechnology experience, which includes IPOs, M&As, financing and corporate leadership. He started his career at Lehman Brothers in investment banking where he led the IPO of Sepracor. He joined Sepracor as CFO, where he held the position for 14 years. During his tenure, Sepracor rose over $2 billion in equity and convertible security financings and later started and commercialized two medicines. His experience also extends to serving on the boards of several companies.

Dr. Rudolph Baumgartner serves as the EVP and chief medical officer where he began in 2007 and brings more than 20 years of scientific, drug and biotechnology development, and clinical experience as a physician to the company. He has extensive experience in all phases of drug and technology development, the FDA regulatory process and has been awarded numerous biotechnology patents.

What To Keep An Eye On

To date, the company has no revenue and net losses of $5.6 million and $7.3 million in in the 9 months ended September 2013 and 2014. Inotek’s balance sheet has $6.5 million in assets, with $5.4 of that in cash. There is $6.3 million of total debt, mostly raised in private offerings. These financials are typical of early-stage biotech companies.

Eye-related biotech IPOs have enjoyed moderate success in the past year. Aerie Pharmaceuticals Inc AERI raised $67 million in its 2013 October IPO. Its stock has gained 148 percent from its offer price of $10.55. Like Inotek, Aerie is also developing its drug as a monotherapy, in addition to a joint treatment with latanoprost. Ocular Therapeutix IncOCUL debuted its IPO in July 2014 and has since gained 136 percent from its $13 IPO price.

Pricing Info

Inotek intends to use proceeds to accelerate the development of its three lead product candidates, repay its borrowings and end its current notes payable agreements.

Underwriters for the offering include Cowen and Company, Piper Jaffray and Canaccord Genuity. The 4.6 million shares offered expect to price between $13 and $15.