Whirly lollipop on orange background.

Achaogen (AKAO) priced their IPO at $12 (bottom end) and added 1M to the size to make it a total of 6M offered. The company has a promising and much-needed new antibiotic dubbed Plazomicin that can be used to treat CRE which is fatal near 1/2 the time and very hard to treat.

If all goes well this drug would be commercialized in 2018. Along the way we’ll get results in 2015 and 2016 with the NDA expected in 2017. Still it’s a long time to wait so this one is for patient investors.

In terms of market size the most acute and immediate need amounts to $450M a year (30K cases x $15K per course of treatment.) Not huge but not bad for one indication. It’s important to note that there is a much larger number of less acute but high risk cases that would also probably receive treatment. This would at least double or triple that annual sales number.

The different mechanism of action is also important because resistant diseases are on the rise and the ability of Plazomicin to penetrate the defenses of these bugs is critically important and likely to have broader applicability. The are competitive products under development at Cubist, Forest, Tetraphase and The Medicines Company but they appear to offer much narrower coverage than Plazomicin.

From the CDC website:

CRE, which stands for carbapenem-resistant Enterobacteriaceae, are a
family of germs that are difficult to treat because they have high
levels of resistance to antibiotics. Klebsiella species and
Escherichia coli (E. coli) are examples of Enterobacteriaceae, a
normal part of the human gut bacteria, that can become
carbapenem-resistant. Types of CRE are sometimes known as KPC
(Klebsiella pneumoniae carbapenemase) and NDM (New Delhi
Metallo-beta-lactamase). KPC and NDM are enzymes that break down
carbapenems and make them ineffective.

Healthy people usually do not get CRE infections. In healthcare
settings, CRE infections most commonly occur among patients who are
receiving treatment for other conditions. Patients whose care requires
devices like ventilators (breathing machines), urinary (bladder)
catheters, or intravenous (vein) catheters, and patients who are
taking long courses of certain antibiotics are most at risk for CRE

Some CRE bacteria have become resistant to most available antibiotics.
Infections with these germs are very difficult to treat, and can be
deadly—one report cites they can contribute to death in up to 50% of
patients who become infected.

Finally Achaogen is well financed and has patient institutions in their corner who have expressed desire to purchase additional shares in the IPO.

With an estimated 16M shares outstanding and the $12 share price the market cap comes to just under $200M which is pretty low given the opportunity. However this is a very long term proposition so is best thought of as a long-term option within a broader portfolio.

Here is a link to the AKAO IPO Roadshow Slide Deck.

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