Ovid Therapeutics, a 3-year-old drug developer focused on treating rare neurological disorders, has filed for an $86.25 million initial public offering (IPO).

The company’s Form S-1 registration statement, which became public this week, was filed confidentially on February 3 with the U.S. Securities and Exchange Commission.

According to the IPO filing, Ovid will use the proceeds in part toward development of its lead product candidate OV101 (gaboxadol), a delta (δ)-selective gamma-aminobutyric acid A (GABAA) receptor the company has licensed from Lundbeck since 2015.

OV101 has begun a Phase II proof-of-concept trial in adults with Angelman syndrome, as well as a Phase I trial in adolescents with Angelman syndrome or Fragile X syndrome. In September, the FDA granted its orphan drug designation to OV101 for Angelman syndrome.

Financial details of the Lundbeck licensing deal were not disclosed at the time that deal was announced—but appear in the IPO filing. Ovid said it agreed in return for the license to issue Lundbeck 1,052,977 shares—roughly 3% of the company—and pay Lundbeck up to $181 million in payments tied to achieving unspecified global development, regulatory, and sales milestones.

Also, should Ovid develop and commercialize OV101, it will have to pay Lundbeck tiered royalties in the low- to mid-teens based on net sales. Ovid also agreed to share with Lundbeck any payments received from commercializing OV101 in China, Japan, or South Korea.

Ovid also said it plans to develop an IV form of gaboxadol called OV102 “for indications in the hospital setting,” either internally or through an external collaboration.

Also in Ovid’s pipeline is OV935 (formerly TAK-935), a potent, highly selective, first-in-class inhibitor of the enzyme cholesterol 24-hydroxylase (CH24H). The company is licensing the rare pediatric epilepsy candidate from Takeda Pharmaceutical under a collaboration by the companies launched in January. OV935 is expected to commence a Phase Ib/IIa proof-of-concept trial this year in rare epileptic encephalopathies, “including Dravet syndrome, LennoxGastaut syndrome, and tuberous sclerosis complex,” Ovid said.

According to the IPO filing, Takeda received 3,831,293 shares of Ovid through the licensing deal—9.1% of Ovid’s total shares, making it the largest institutional investor. Takeda could gain even more shares if the candidate advances to Phase III, up to 19.99% of Ovid stock, as well as $35 million in cash or shares tied to achieving regulatory and sales milestones.

The price range for Ovid shares and the number of shares the company plans to offer have yet to be determined.

4 Priorities for Proceeds

Also undetermined is how much in proceeds will go toward four priorities identified in the registration statement. First among them is conducting and completing the Phase II STARS trial of OV101 in adults with Angelman syndrome and the Phase I trial in OV101 in adolescents with Angelman syndrome or Fragile X syndrome, as well as other future Phase II trials in adolescents and children in these indications.

Other uses for the proceeds identified in the IPO include:

  • Conducting and completing a Phase Ib/IIa trial of OV935 in patients with epileptic encephalopathies.
  • Carrying out other ongoing R&D activities related to additional drug candidates and preclinical programs.
  • Funding the expansion of “patient-focused” activities, including social media outreach and involvement, as well as working capital and general corporate purposes.

“The principal purposes of this offering are to increase our capitalization and financial flexibility, establish a public market for our common stock, and facilitate future access to the public equity markets by us, our employees, and our stockholders, as wells as obtain additional capital to support our operations and increase our visibility in the marketplace,” Ovid stated.

According to the Form S-1, Ovid finished last year with a net loss of approximately $22.4 million, up from a $13.2 million net loss in 2015. As of December 31, 2016, the company had an accumulated deficit of approximately $35.9 million, working capital of $48.7 million, and cash and cash equivalents of $51.9 million.

“We believe our cash and cash equivalents at December 31, 2016 will be sufficient to fund our current operating plans through at least the next 12 months,” Ovid stated.

Based in New York, Ovid was established in 2014 by Chairman and CEO Jeremy M. Levin, D.Phil., MB BChir, and Matthew During, M.D., D.Sc., president and CSO. Levin is the company’s largest single stockholder with 11,453,232 shares or 26.8%, followed by Dr. During with 10,497,394 shares or 24.7%.

After holding executive positions at Novartis and Bristol-Myers Squibb, Dr. Levin served as Teva Pharmaceutical Industries CEO for 17 months until October 2013, when he resigned after unveiling a cost-cutting plan that included the elimination of 5000 jobs worldwide, but which touched off a political uproar in Israel, where the company is headquartered.

Ovid has applied to list its common stock on the NASDAQ Global Market under the symbol OVID. Joint book running managers for the IPO include Citigroup Global Markets, Cowen and Co., William Blair, and JMP Securities.

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