OKYO Pharma Pursues $10 Million U.S. IPO (Pending:OKYO)

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A Quick Take On OKYO Pharma Limited

OKYO Pharma Limited (OKYO) has filed to raise $10 million in an IPO of its American Depositary Shares representing underlying ordinary shares, according to an F-1/A registration statement.

The firm is a preclinical stage biopharma developing treatments for various eye diseases.

Preclinical stage biopharma companies are extremely high risk as IPO candidates. While I wish the firm well in its research efforts, I’m on Hold for the IPO.

Company & Technology

Guernsey-based OKYO was founded to develop OK-101, which is focused on treating dry eye disease and is also being studied for other eye-related conditions.

Management is headed by Chief Executive Officer Dr. Gary S. Jacob, who has been with the firm since January 2021 and was previously CEO of Immuron Limited, an Australian biopharma firm focused on the microbiome. Prior to that, he was CEO of Synergy Pharmaceuticals.

The firm’s lead candidate, OK-101, is currently in IND-enabling studies and management projects the drug may be able to enter Phase 2 trials by the last quarter of 2022.

Below is the current status of the company’s drug development pipeline:

OKYO Pipeline

OKYO Pipeline (SEC EDGAR)

OKYO has booked fair market value investment of $123 million as of September 30, 2021, from investors including Panetta Partners Ltd.

OKYO’s Market & Competition

According to a 2019 market research report by Transparency Market Research, the global dry eye disease [DED] market was valued at $5 billion in 2016 and is projected to reach $7.7 billion by 2025.

This represents a forecast CAGR (Compound Annual Growth Rate) of 4.5% from 2017 to 2025.

Key elements driving this expected growth are a rising prevalence of DED as well as increasing drug research and development efforts due to the nearing expiry of numerous patents.

Also, growing per capita health expenditures and increasing investment by pharma companies will result in the Asia Pacific region gaining market share through 2025.

Major competitive vendors that provide or are developing related treatments include:

Santen Pharmaceutical Co., Ltd. (OTCPK:SNPHY), Novartis AG (NVS), Valeant Pharmaceuticals International, Inc., Allergan plc, Shire plc, TRB Chemedica International SA, Sun Pharmaceutical Industries Ltd., Senju Pharmaceutical Co., Ltd., Sentiss Pharma Pvt. Ltd., Johnson & Johnson (JNJ), Otsuka Pharmaceutical Co., Ltd., Mitotech S.A., and FCI S.A.S.

OKYO Pharma Limited Financial Status

The firm’s recent financial results are typical of a biopharma firm in that they show no revenue and significant R&D and G&A expenses associated with its research efforts.

Below are the company’s financial results for the past two and one-half years:

Statement of Operations

Statement of Operations (SEC EDGAR)

As of September 30, 2021, the company had $5.2 million in cash and $666,328 in total liabilities.

OKYO Pharma Limited IPO Details

OKYO intends to raise $10 million in gross proceeds from an IPO of its American Depositary Shares representing underlying ordinary shares, offering 1.9 million ADSs at a reference price of $5.24.

No existing shareholders have indicated an interest to purchase shares at the IPO price.

The firm’s stock is currently listed on the London Stock Exchange under the symbol “OKYO”.

Assuming a successful IPO, the company’s enterprise value at IPO would approximate $107.1 million, excluding the effects of underwriter over-allotment options.

The float to outstanding shares ratio (excluding underwriter over-allotments) will be approximately 8.28%.

Management says it will use the net proceeds from the IPO as follows:

approximately $1 million to advance OK-101 to the filing of an IND to treat DED, and approximately $5 million to fund the initial Phase 2 clinical trial of OK-101 in DED patients; and

the remainder to fund working capital and other general corporate purposes.

We anticipate that our existing cash resources, together with the net proceeds from the offering, will enable us to fund our operating expenses and capital expenditure requirements for at least the 12 months after the date of this prospectus.

(Source)

Management’s presentation of the company roadshow is not available.

Regarding outstanding legal proceedings, management did not characterize the firm’s legal exposure, if any.

The sole listed bookrunner of the IPO is ThinkEquity.

Commentary About OKYO’s IPO

OKYO is seeking U.S public investment to fund advancement of its lead drug candidate into trials and to further investigate other indications for possible treatment.

The firm’s lead candidate, OK-101, is currently in IND-enabling studies and management projects the drug may be able to enter Phase 2 trials by the last quarter of 2022. Apparently, the drug has the option of skipping Phase 1 safety trials.

The market opportunity for the treatment of dry eye disease is relatively large and expected to grow at a moderate rate of growth in the coming years.

Management has not disclosed any major pharma firm collaboration agreements.

The company’s investor syndicate does not include any well-known institutional life science venture capital firms or strategic investors.

ThinkEquity is the sole underwriter, and IPOs led by the firm over the last 12-month period have generated an average return of negative (54.9%) since their IPO. This is a bottom-tier performance for all major underwriters during the period.

Notably, the company has had other apparently non-life science-related investments, such as a $17 million loan to a “West African Minerals Ltd.”, which was largely written off in return for shares.

As for valuation, management is asking investors to value the firm well below the typical range for a biopharma firm at IPO.

Preclinical stage biopharma companies are extremely high risk as IPO candidates. While I wish the firm well in its research efforts, I’m on Hold for the IPO.

Expected IPO Pricing Date: To be announced.

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