Cortexyme Files For U.S. IPO

About: Cortexyme (CRTX), Includes: ABBV, BIIB, CELG, ESALY, LLY, MRK, NVS, RHHBY
by: Donovan Jones

Cortexyme has filed to raise $86.25 million in a U.S. IPO.

The firm is developing a treatment candidate for Alzheimer's Disease.

CRTX has achieved promising early stage trial results and expects the IPO proceeds to enable it to publish initial top line data from planned Phase 2/3 trials.

Quick Take

Cortexyme (CRTX) has filed to raise gross proceeds of $86.25 million from a U.S. IPO, according to an S-1 registration statement.

The firm is developing a new potential therapeutic for the treatment of Alzheimer’s disease.

CRTX has had positive safety trial results and intriguing post-treatment markers for Phase 1 trial patients.

I’ll provide an update when we learn more IPO details.

Company And Technology

San Francisco, California-based Cortexyme was founded in 2012 to develop a new upstream therapy for Alzheimer’s disease [AD].

Management is headed by Founder, President and CEO Casey C. Lynch, who was previously co-founder and board member at Neurotechnology Industry Organization.

Cortexyme has developed the COR388, a selective gingipain inhibitor [SGI] that effectively crosses the blood-brain barrier. Gingipains are secreted by Porphyromonas gingivalis, an intracellular bacteria that is present in 80 to 90% of all AD patients.

Management states that according to new clinical data, gingipains have been found to cause Alzheimer’s pathology in animal models. Moreover, AD pathology is thought to mimic that of an infection - for example, the presence of amyloid beta, a peptide that was recently categorized as antimicrobial.

In preclinical mouse models, P. gingivalis has been found to penetrate the brain tissue and cause amyloid formation, inflammation, and neurodegeneration - underlying causes of AD and other neurodegenerative diseases.

In Phase 1a/1b placebo-controlled clinical trials, CRTX enrolled 67 AD patients for a 28-day treatment with COR388. According to management, the drug “was well-tolerated with no concerning safety signals,” while post-treatment AD markers were improved in the treated group.

Investors in Cortexyme include Vulcan Capital, Takeda Ventures, Breakout Ventures, Huizenga Capital Management, Dolby Family Ventures, EPIQ Capital Group, Lamond Family, Verily, Pfizer Venture Investments, and Sequoia Capital, among others.

Source: VentureDeal Venture Capital Database

Market And Competition

According to a 2015 market research report by Research and Markets, the AD treatment market was valued at $4.75 billion in 2014 and is projected to reach $8.21 billion by 2020, representing a CAGR of 9.5% between 2015 and 2020.

The syndromes of dementia and movement disorders treatment markets were valued at $12.86 billion in 2014 and are expected to reach $20.15 billion by 2020, growing at a CAGR of 8.6 during the forecast period.

The main factors driving market growth are the increasing prevalence of neurodegenerative diseases, growing research and development initiatives, and rising awareness of mental disorders.

The Asia-Pacific region is projected to grow at the fastest rate during the period.

Major competitors that provide or are developing treatments include:

Source: Sentieo

Management considers its lead drug candidate to be the first SGI to be clinically developed and believes that gingipains are an upstream cause of AD and other neurodegenerative diseases.

Financial Status

CRTX’s recent financial results are typical of a trials stage biopharma in that the firm has no revenues and significant G&A and R&D costs associated with its regulatory effort.

Below are the company’s financial results for the past two years (Audited PCAOB):

Source: Company registration statement

As of December 31, 2018, the company had $71.7 million in cash and $1.5 million in total liabilities.

IPO Details

CRTX intends to raise $86.25 million in gross proceeds from an IPO of its common stock, not including customary underwriter options.

No entities of existing shareholders have indicated an interest to purchase shares of the IPO. I would expect to see some investor support for the IPO to be successful.

Per the firm’s latest filing, it plans to use the net proceeds from the IPO as follows:

We intend to use the net proceeds from this offering to fund our global Phase 2/3 GAIN clinical trial for COR388, and to support future clinical and preclinical activities, manufacturing and development of our library of compounds, as well as for working capital and general corporate purposes, which may include the costs of operating as a public company.

We estimate that our current capital resources, along with the net proceeds from this offering, will be sufficient to fund our operating expenses and capital expenditure requirements through 2021, including through the completion and the announcement of the top-line results of our Phase 2/3 GAIN trial. However, the net proceeds from this offering, together with our current cash, will not be sufficient for us to fund the development of COR388 through regulatory approval, and we will need to raise additional capital to complete the development and commercialization of COR388. At this time, we cannot predict with certainty the amount of capital needed to complete the development and commercialization of COR388, but we anticipate seeking additional capital in the future to fund such capital needs through further equity offerings and/or debt borrowings.

Management’s presentation of the company roadshow isn’t available.

Listed underwriters of the IPO are BofA Merrill Lynch, Credit Suisse, Canaccord Genuity, JMP Securities.

Expected IPO Pricing Date: To be announced.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.