Quick Take
Arog Pharmaceuticals (AROG) intends to raise gross proceeds of $74.75 million from a U.S. IPO, according to an S-1 registration statement.
The firm is developing therapeutics for blood and solid tumor cancer patients.
AROG has had very promising trial results for its lead candidate but may be resource-challenged as it proceeds through expensive Phase 3 trials, and we won’t see results until 1H 2020 at the earliest.
When we learn more details about the IPO from management, I’ll provide an update.
Company and Technology
Dallas, Texas,-based Arog Pharmaceuticals was founded in 2010 to improve the lives of cancer patients by developing Crenolanib in indications with high unmet needs.
Management is headed by Director and CEO Scott Salka, who has been with the firm since 2018 and was previously CEO at Ampliphi Biosciences (APHB).
Arog has developed Crenolanib, an orally administered, highly potent and selective, mutation-resistant pan-FLT3 inhibitor. To date, crenolanib has been evaluated in more than 400 patients across 19 completed or ongoing clinical trials.
Phase 1/2 clinical trials of crenolanib combined with intensive chemotherapy in patients with relapsed or refractory and newly diagnosed FLT3-mutated acute myeloid leukemia (AML) composite complete remission was observed in 68% and 85% of patients, respectively, as shown by a reduction in leukemic blasts to less than or equal to 5% in the bone marrow.
(Source: Arog S-1)
Market and Competition
According to a 2017 market research report by GlobalData, the global AML market was valued at $406 million in 2016 and is projected to reach $1.5 billion by 2026, representing a CAGR of 14% during the period between 2017 and 2026.
The main factors driving market growth are the launch of premium-priced therapies, increased use of branded drug treatments, development of therapies targeting specific driver mutations, and a rise in the number of elderly populations with AML.
Major competitors that provide or are developing AML therapies include:
Financial Status
AROG’s recent financial results are typical for a biopharma firm in clinical stage of development.
Below are the company’s financial results for the past two and ½ years (Audited PCAOB for full years):
(Source: Arog S-1)
As of June 30, 2018, the company had $887,000 in cash and $8.8 million in total liabilities. (Unaudited, interim)
IPO Details
AROG intends to raise $74.75 million in gross proceeds from an IPO of its Class A, not including customary underwriter options.
Class B shareholders will be entitled to ten votes per share compared to one vote per share for Class A shareholders.
Multiple classes of stock are a way for management and existing shareholders to retain voting control of the company even after losing economic control.
No existing shareholders have indicated an interest to purchase shares at the IPO price. It’s typical for at least one investor to “support” the IPO in this fashion and I would expect to see this term in future filings.
Management says it will use the net proceeds from the IPO as follows:
For our Phase III clinical trial in relapsed or refractory FLT3-mutated AML patients as a second or third line treatment;
For our Phase III clinical trial in newly diagnosed FLT3-mutated AML patients as a first line treatment;
For our ongoing Phase III clinical trial in GIST, ongoing Phase I/II clinical trials in glioma and gastric indications and planned Phase I/II clinical trial[s] in FLT3-mutated AML in combination with alternatives to intensive chemotherapy; and
To repay amounts outstanding under our Related Party Demand Notes with Jain Investments.
Management’s presentation of the company roadshow isn’t available yet.
Listed underwriters of the IPO are Citigroup, RBC Capital Markets, and Nomura.
Expected IPO Pricing Date: Not on the calendar yet.
An enhanced version of this article on my Seeking Alpha Marketplace research service IPO Edge includes my initial commentary on the IPO.
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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.
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