Alcobra Ltd., which is developing a treatment for attention deficit hyperactivity disorder (ADHD), today filed a draft prospectus with the US Securities and Exchange Commission (SEC) to hold an IPO on Nasdaq. The company reportedly plans to raise $15-20 million at a company value of $100 million, before money.
If the offering goes ahead, it will be the first IPO by an Israeli life sciences company on Nasdaq since 2010 (by D Medical Industries Ltd. (Bulletin Board: DMEDF); TASE:DMED), which has since been relegated from Nasdaq). There have been a few IPOs by Israeli life sciences companies over the past decade, including Rosetta Genomics Ltd. (Nasdaq:ROSG), Syneron Medical Ltd. (Nasdaq: ELOS), Omrix Biopharmaceuticals, and other companies listed through reverse mergers with stock market shells.
Alcobra was founded in 2008 by 7 Health Ventures partner Dalia Megiddo and Udi Gilboa, whose investments include InsuLine Medical Ltd. (TASE: INSL), and they are its main shareholders. They are behind the idea of using an existing drug for the treatment of alcoholism to treat ADHD, after clinical trials for the first indication found that the drug improves attention.
Alcobra's drug, MG01CI, is undergoing a Phase II clinical trial, and the company has a development agreement with Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) that is potentially worth hundreds of millions of dollars. But when the time came for Teva to exercise its option to continue development of the drug, it asked for an extension.
"The timing was problematic for us, coming two weeks after Teva CEO announced his resignation," says Alcobra CEO Dr. Yaron Daniely. Alcobra gambled and rejected the request for an extension, to prevent product development delays. "There were other parties interested in us," says Daniely.
Teva still owns a minority stake in Alcobra. Former Teva VP innovative ventures Dr. Aharon Schwartz now serves as Alcobra's chairman.
It is difficult to know whether Alcobra made the right decision. Although it has avoided a year of possible paralysis, it suits Teva's new strategy, and it may still be able to find a new partner. Meanwhile, Alcobra is moving forward on its own, and the clinical trial for its drug is neither long nor expensive. Daniely believes that the drug can be launched within 2-3 years, but it will later need a strong partner for marketing.
"Every launch of a new ADHD product in the past ten years cost $1 billion," Daniely told "Globes". "The US market alone is worth $4 billion."
There are currently two main families of ADHD drugs: stimulants like Ritalin; and non-stimulants like Strattera, made by Eli Lilly & Co. (NYSE: LLY). "Ritalin and its peers are hard to manage, because they can also be used as drugs, so patients must renew their prescriptions every 30 days," says Daniely. "Strattera was one of the most successful launches of all time, and it had $600 million in sales in its second year, until severe side effects appeared. Eli Lilly has stopped promoting the drug, but it has maintained its level of sales. This shows the advantages of non-stimulant treatments in the eyes of doctors and consumers."
Daniely believes that MG01CI has the best of both worlds: it has few side effects, an immediate effect, and no high, which means that it will not come under narcotics regulations.
"Globes": Why raise capital now, instead of finding a strong partner?
Daniely: "This is an opportunity to raise money at a good valuation, and we're raising capital while keeping close ties with all the players in the market. We believe that the company's value will rise after the Phase III clinical trial."
Published by Globes [online], Israel business news - www.globes-online.com - on January 14, 2013
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