Sophiris Bio Inc rumored to be sold/partnered shortly (TheStreet article 9/13)

Sophiris Bio Inc (NASDAQ:SPHS) just picked up a coverage initiation at Zacks, and the extra attention is pushing the company’s market capitalization higher. We’ve highlighted Sophiris as one of our top biotech picks in the past, suggesting it might be in line for a partnership near term, and the fact that markets are shifting attention to the company looks to vindicate this suggestion. A couple of key developments have taken place since we last had the company in our crosshairs, so by way of an update, here’s how they fit in to our forward bias.

First, a quick re-introduction to the company.

Sophiris is a California based biotech focused primarily on cancer therapies. As we mentioned previously, the company has a few candidates in the backend of its pipeline, but the one that we are focusing on as driving value near term is PRX302, an enlarged prostate / prostate cancer drug. Again, for a more detailed description of the drug’s MOA, check out our previous discussion here. By way of a brief recap, however, it’s a drug designed to not activate until it comes into contact with prostate tissue (a prostate tissue specific enzyme essentially unlocks the active compound) and when activated, it puts what amount to holes in the membrane of cancerous cells. The cellular material leaks out of the newly created pores, in a sort of crude version of apoptosis.

The lead indication is BPH (enlarged prostate).

Data from a phase III trial investigating the safety and efficacy of PRX302 in this indication proved the drug works, to a stat sig degree, and that it is safer (and less intrusive) than current SOC. This data isn’t going to be enough to form the basis of an NDA, however, and this was the driver behind our previous partnership suggestion.



Essentially, the company is going to have to partner up with another entity if it wants to fund the second of the two required pivotals. Estimated cost of the trial is between $35-40 million, meaning a raise would be devastating from a dilution perspective. As such, the only real option (assuming the company doesn’t want to totally alienate its shareholders) is to find a non dilutive partnership.

So what developments have taken place since we last looked at Sophiris? Two, of note.

The first was in the works as we first took a look at the company, and has now concluded. The company grossed around $26 million on a discounted issue, and not surprisingly, shareholders weren’t happy about the raise. The company sold off on the close and has yet to recover from its impact.

The second is an institutional stake. Sabby Capital reported on August 25 that the firm had picked up an 8.5% stake in Sophiris, by way of a 2.48 million share purchase. This helped to mitigate some of the raise-induced downside, but far from negates it.

What’s our bottom line on this one?

The latest developments only serve to reinforce our expectations of a big name partnership being just around the corner, and this makes it difficult not to maintain a bullish bias on Sophiris. We think that the company’s science is sound, and its lead candidate strong (both in the enlarged prostate indication and – beyond that – a prostate cancer extension) and from the information made public there doesn’t look to be any major stumbling blocks on the path to approval.

That is, of course, except the capital side of the equation. There are a number of companies that would love to take on a late stage asset with such a large potential market, and we think it can only be a matter of time before one, or more, expresses some interest. This is when the real upside will come, and the dilution that came on the back of the latest raise will be rear view material.

We’ve got our ears to the ground for any rumored suitors. Subscribe to our newsletter below and we’ll keep you updated if and when we hear anything!

Disclosure: We have NO position in SPHS and have NOT been compensated for this article.