Deerfield Management Discloses Stake In Recently Public Neos Therapeutics Inc (NEOS)

Constantly on the hunt for biotechnology stocks, James E. Flynn has identified another potential winner. In a recent Form 3 filing with the Securities and Exchange Commission, Flynn’s fund, Deerfield Management, has disclosed ownership of Neos Therapeutics Inc (NASDAQ:NEOS) stock and warrants ahead of the company’s initial public offering (IPO). According to the filing, the fund holds 208,333 shares of class C preferred stock and warrants to purchase 104,166 Series C preferred shares, with an exercise price of $12.00. Flynn and Deerfield Management were shareholders of Neos Therapeutics before the company went public and owned 625,000 shares before the IPO.

Neos Therapeutics

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details).

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Based in Grand Prairie, TX, Neos Therapeutics Inc (NASDAQ:NEOS) was founded in 1994 and engages mainly in the development and marketing of medication used for the treatment of Attention Deficit Hyperactivity Disorder (ADHD). A secondary product manufactured by the company is Tussionex®, a product indicated for the relief of cough and upper respiratory symptoms. Neos Therapeutics has announced today that 4,800,000 shares of common stock will be offered at a price of $15.00 per unit, plus an additional 720,000 shares as over-allotment options. The shares started trading on NASDAQ earlier today and the offering is expected to close on July 28.

A huge gamble

The financial reports submitted by Neos Therapeutics Inc (NASDAQ:NEOS) for the years 2013 and 2014 shows losses of $19 and $20.8 million respectively. In 2014,  revenues fell to $758,000 from the $1.04 million reported in the previous year. According to its balance sheet as of March 31, 2015, the company has $26.1 million cash holdings and total assets of $54.6 million. It is also important to note that the company faces a huge downside risk since its ADHD medication has not yet been approved by the Food and Drug Administration (FDA). In its S-1 filing with the SEC, Neos Therapeutics reports:

If the FDA does not conclude that our product candidates satisfy the requirements for the 505(b)(2) regulatory approval pathway, or if the requirements for approval of any of our product candidates under Section 505(b)(2) are not as we expect, the approval pathway for our product candidates will likely take significantly longer, cost significantly more and encounter significantly greater complications and risks than anticipated, and in any case may not be successful.

Disclosure: none.