PaxMedica Proposes Terms For $15 Million IPO
PaxMedica (PXMD) aims to raise $15 million from the sale of its common stock in an IPO, according to an amended registration statement.
The company is developing treatments for neurodevelopmental disorders such as autism.
PXMD is a thinly capitalized firm with an unorthodox trial effort.
Woodcliff Lake, New Jersey-based PaxMedica was founded to advance programs based on anti-purinergic therapies for neurodevelopmental disorders such as autism spectrum disorder [ASD] and Fragile X syndrome tremor-ataxia.
Management is headed by Chief Executive Officer Mr. Howard Weisman, who has been with the firm since March 2020 and was previously founder and Executive Chairman of Sofregen, a clinical stage biomedical device firm in the reconstructive plastic surgery industry.
Below is a brief overview video of ASD:
The firm’s lead candidate, PAX-101, is an intravenous-delivered suramin formulation that it is developing for autism, Fragile X and Human African Trypanosomiasis [HAT].
PAX-101 is currently 60% complete in enrolling patients in a Phase 2b trial in South Africa for the treatment of ASD, with an expectation completion date by the end of 2020 and data readout by ‘early in 2021.’
PXMD believes it can achieve regulatory approval for the HAT indication, then monetize the potential receipt of an FDA priority review voucher in order to fund its other indication programs.
Investors in the firm have invested at least $1.2 million and include TardiMed Sciences.
According to a 2018 market research report by Market Research Future, the global market for autism spectrum disorder [ASD] was valued at $5.1 billion in 2016.
This represents a forecast CAGR (Compound Annual Growth Rate) of 4.73% from 2017 to 2023.
Key elements driving this expected growth are continued growth in the range of neurodevelopmental disorder incidence as well as growing governmental support and forecasted approvals of various off-label treatment options by the FDA.
However, the market faces a small pipeline of drugs due to the generally ‘unknown etiology and pathophysiology of ASD.’
Major competitive vendors that provide or are developing treatments include:
- Yamo Pharmaceuticals
- GW Pharmaceuticals (GWPH)
- Zynerba Pharmaceuticals (ZYNE)
- Other major pharma firms
Management says there are ‘no known treatments or active development programs’ for Fragile X syndrome.
PaxMedica’s recent financial results indicate the firm has earned no revenue and has a small amount of various G&A and R&D expenses associated with its development activities.
Below are the company’s financial results from April 5, 2018 to the end of 2019:
Source: Company registration statement
As of March 31, 2020, the company had $249,804 in cash and $217,114 in total liabilities. (Unaudited, interim)
PXMD intends to sell 2.5 million shares of common stock at a midpoint price of $6.00 per share for gross proceeds of approximately $15.0 million, not including the sale of customary underwriter options.
No existing shareholders have indicated an interest to purchase shares at the IPO price, a common feature of successful life science IPOs.
Assuming a successful IPO at the midpoint of the proposed price range, the company’s enterprise value at IPO would approximate $58.9 million.
Excluding effects of underwriter options and private placement shares or restricted stock, if any, the float to outstanding shares ratio will be approximately 25.37%.
Per the firm’s most recent regulatory filing, it plans to use the net proceeds as follows:
We currently expect to use the net proceeds from this offering for product development activities, including clinical and regulatory research and development for our product candidates, and the remainder for working capital and other general corporate purposes, including the payment of accrued but unpaid salaries and the associated costs of operating as a public company.
Based on our current projections, we believe the net proceeds of this offering will fund our operations through the end of the second fiscal quarter of 2022. At that time, we expect the net proceeds from this offering to have funded [i] the receipt of NDA approval (and the potential award of a tropical disease PRV) for the HAT indication, and [ii] submission of IND applications for the ASD and FXTAS indications.
Management’s presentation of the company roadshow is not available.
Listed underwriters of the IPO are The Benchmark Company and Brookline Capital Markets.
PaxMedica is seeking an unusually small IPO to advance its PAX-101 candidate through trials for various indications
For its lead candidate, management expects to complete enrollment in 2020 and to publish its first data readout in early 2021, assuming no delays.
The market opportunities for the various conditions covered by the drug candidate are large but growth characteristics are unknown.
Additionally, management intends to pursue approval for treating HAT and use the proceeds from monetizing that approval to develop its other indication treatments.
The firm has disclosed no research or commercial collaborations, so is pursuing a ‘go-it-alone’ approach at this time.
The Benchmark Company is the lead left underwriter and IPOs led by the firm over the last 12-month period have generated an average return of 33.5% since their IPO. This is a top-tier performance for all major underwriters during the period.
As to the proposed $59 million valuation, that is unusually low for a typical biopharma at IPO.
Also, the firm is very thinly capitalized. My opinion on the IPO is to AVOID it.
Expected IPO Pricing Date: To be announced.
(I have no position in any stocks mentioned as of the article date, no plans to initiate any positions within the next 48 hours, and no business relationship with any company whose stock is mentioned in this article. IPO stocks can be very volatile in the days immediately after an IPO. Information provided is for educational purposes only, may be in error, incomplete or out of date, and does not constitute financial, legal, or investment advice.)
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