Cosmo moves to spin out clinical-phase dermatology assets in Swiss IPO

Cosmo Pharmaceuticals (SIX:COPN) is pushing ahead with plans to spin out its dermatology assets and list the resulting company on the SIX Swiss Exchange. To get the project underway, Cosmo and its shareholders have clubbed together for a €49.9 million ($56.5 million) capital increase, giving the spinout the cash it needs to wrap up a Phase III trial of its lead candidate.

Luxembourg-based Cosmo currently owns 97% of the spinout--which it named Cassiopea--but plans to sell half of its stake or more in an upcoming IPO. The IPO will see Cosmo cut its stake in Cassiopea to below 50%, with its existing investors gobbling up a chunk of the available shares. German billionaire Dietmar Hopp's dievini fund, Swiss investment group Heinrich Herz and members of Cosmo's C-suite are set to scoop up around one-quarter of the available shares, with other existing investors coming on board to claim a further 13% of the listing.

Cosmo plans to make around two-thirds of the shares available to new investors, a group it hopes to woo with the potential of Cassiopea's clinical-phase pipeline. Acne candidate Winlevi, a steroidal ester androgen antagonist, is the most advanced asset. Cosmo expects to finish Phase III trials of the drug in the U.S. and Europe before Cassiopea's current bank balance is forecast to dwindle to zero around the end of 2017. The timeline dangles a possible mid-term approval of a topical acne drug that could offer a better safety profile than existing oral therapies in front of IPO investors.

Cassiopea CEO Diana Harbort

Valeant ($VRX) has first refusal on the program should Cassiopea decide to outlicense it, an option the Canadian company picked up when it dropped its earlier claim on the asset in the wake of last year's Phase II data. Cassiopea also has a clutch of mid-phase assets in its pipeline. The androgen antagonist in Winlevi, code-named CB-03-01, is also being developed as a treatment for hair loss. And a drug against genital warts and an antibiotic to treat acne are also at the clinical proof-of-concept stage. The four programs are central to Cassiopea's chance of succeeding as an independent entity.

The exact timing and terms of what will be a rare biotech IPO in Switzerland are still being decided, but Cosmo has been clear it plans to list the spinout in 2015. Until then, Cosmo is bankrolling the company. Diana Harbort, who was a VP at dermatology specialist Medicis prior to its $2.6 billion takeover by Valeant, is in charge at Cassiopea.

- read the release (PDF)