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GlycoMimetics (GLYC) paused their deal late last year when the terms were $14 to $16/share with 4M shares offered. This week they are back with a short marketing duration and a lower price of $8/share and 5.7M shares offered plus the typical 15% over allotment.

Insiders including Pfizer (PFE) have agreed to buy $14M of stock in the IPO. The deal is being brought by an odd group of banks led by Jefferies and Barclays. The lower price and insider commitments should help the deal get done this time.

Sickle Cell is an orphan disease category and the primary target are the 90,000 to 100,000 US patients with “sickle cell crisis” symptoms. There are 73,000 hospitalizations around this event with an average stay of 6 days with a $20K to $40K range of charges. There is no effective treatment, other than for symptoms is available. Shaving two or three days off the hospital stay has clear economic benefits. The Sickle Cell program has exited Phase II and is expected to pass into Phase III with will trigger additional milestone payments from Pfizer.

There are other drug development programs but they are all preclinical. The stock will rise or fall with the success of the Phase III trial of the Sickle Cell drug (GMI-1070). So far GLYC has received $22.5M in payments from Pfizer with a total potential of $320M in milestone payments. The Phase 3 trial is planned for the second half of 2015.

Specifically the economics with Pfizer call for a $15M payment in April followed by another $20M when the first dosing is completed in the Phase 3 trial. Further regulatory milestones total $70M and commercial milestones add $135M. Post commercialization GLYC receives royalties “ranging from the low double digits to low teens” which we would translate to 10% to 13%.

A detailed description of the company science and technology is beyond our scope but we will say that their platform targets the carbohydrate layer that surrounds all cells by creating “mimetic” structures that can inhibit disease-related functions. Pfizer obviously thinks that there is some promise in this approach which is good enough for us.Screenshot 2014-01-08 17.09.55

Total shares outstanding post offering will be 16.3M to make the proposed market capitalization $130M. Valuing GLYC is no simple matter. There are the milestone payments but they are one-time in nature. Looking at the market post-commercialization we estimate a per-hospitalization treatment price of $5,000. Given the results shown in terms of reduced stay, lower opiates needed and faster time off IV this is reasonable. It could be a bit higher but it’s not likely to be more than $10,000. Using the $5,000 figure and a 10% royalty gives us an annualized TAM of $36M to GLYC.

This helps to explain why the company is doing the IPO and putting the bulk of the proceeds into developing their other drugs. $36M/year is not a big number. That said we know there is substantial expansion even in that market so it could be a $50 to $75M/year royalty over time.

Like many biotechnology companies there are some major potential wins for GLYC in areas including leukemia, cancer and cardiovascular disease. However it’s hard to go beyond the lead drug candidate in the medium term.

The most recent IPO roadshow slides are archived here via this link.

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