Here are this week’s upcoming technology IPOs:
Adama Agricultural Solutions Ltd.
Ticker: (NASDAQ: ADAM)
Expected to Trade: Friday, November 21
Price Range: $16.00-$18.00
Business Description
Adama, formerly known as MANA, is a leading provider of crop protection solutions in the U.S.
Specifically, the company sells insecticides, herbicides, fungicides, growth regulators, and harvest aids. Think along the lines of Monsanto, but on a smaller scale and with an off-patent portfolio.
Our Take
Despite being new to the public market, Adama is a well-established company with some strong history behind it. Adama is the world’s largest maker of off-patent agro-chemicals and operates internationally, with markets in Europe, Latin America, North America, Asia, and Israel.
Adama’s revenues for the third quarter of 2014 totaled $761.5 million compared to $732.0 million in the third quarter of 2013. The company posted $24 million on the bottom line, up 33% from a year earlier.
Adama has recently entered into an agreement with China National Agrochemical Corporation (CNAC) to acquire control of several companies with 2013 total sales of $863.5m. Once completed, the acquisition is expected to raise Adama’s revenues to close to $4 billion and give the company a major foothold in the Chinese market.
China is becoming one of the biggest global producers of agricultural chemicals, so over time, this is expected to become one of Adama’s key growth engines. The company also plans to increase business in emerging markets, where the industry expects to get much of its growth.
Increased demand for meat in developing countries is also expected to increase demand for grains and agricultural products. Farm size and sophistication will increase in these countries, so there should be increased demand for advanced pesticides and fertilizers.
According to chief economist Kevin Swift of the American Chemistry Council, global growth for agricultural chemicals will improve to 3.8% by the end of 2014 as compared to 2.4% growth in 2013. This represents the highest growth rate for the industry in the last 20 years.
Further, the majority of this growth is expected to occur in developing nations, where Adama will be focusing.
There’s little reason not to be a fan of Adama as it enters the public market.
Neothetics
Ticker: (NASDAQ: NEOT)
Expected to Trade: Thursday, November 20
Price Range: $13.00-$15.00
Business Description
Neothetics is a clinical-stage biotechnology company developing therapeutics for the aesthetic market with an initial focus on fat reduction and body contouring.
The company’s lead product candidate, LIPO-202, is an injection for localized reduction of central abdominal subcutaneous fat in non-obese patients. In other words, the injection aims to reduce those unwanted potbellies, stomach rolls, and stomach pouches.
Neothetics describes LIPO-202 as a “five minute or less, non-surgical procedure that effectively and safely reduces abdominal bulging in non-obese patients, with no downtime.” It plans to initiate phase III trials in the first half of 2015.
Neothetics is also developing LIPO-102, a candidate that may treat symptomatic exophthalmos, a thyroid-related eye disease caused by the expansion of fat behind the eye.
Our Take
During the phase II trial for LIPO-202, 513 patients were tested with a 92% completion rate (no patients withdrew due to adverse effects).
Patients receiving the highest dosage in this study showed a mean reduction in waist circumference of 1.6 cm, compared to 0.65 for the placebo group.
These patients also saw a reduction in abdominal volume of the treatment zone that was more than double that of the placebo group.
No significant adverse effects occurred during the study, and there was no meaningful difference in adverse effects between treatment and placebo groups.
If the phase III study for LIPO-202 is able to replicate these phase II results, chances of this product hitting the market are relatively high.
Currently, there are no FDA-approved therapeutics targeting localized abdominal fat reduction, which obviously bodes well for Neothetics.
It’s difficult to forecast the market for an aesthetic therapy with no competitors yet on the market, but it’s worth pointing out that in 2013, weight loss product sales in the U.S. hit $60.5 billion. This figure includes everything from Jenny Craig to diet sodas, but it gives us an idea of how much money Americans are willing to dish out to improve their physiques.
As of September 30, 2014, Neothetics had cash and cash equivalents of approximately $14.7 million. The company expects to raise an additional $60 million in its public offering, which should provide ample time for LIPO-202 to move through phase III trials.
There’s definitely risk here, but we like the odds considering the blockbuster potential of LIP0-202. Just think collagen but for your belly.
