PaxMedica Refiles Terms For Smaller IPO

Aug. 10, 2022 11:45 AM ETPaxMedica, Inc. (PXMD)

Summary

  • PaxMedica has refiled proposed terms for an $8.5 million U.S. IPO.
  • The firm is developing a treatment for East African HAT, autism spectrum disorder and other neurodevelopmental conditions.
  • PXMD has made some progress on its lead candidate, but the company is thinly capitalized and is still ultra-high risk.
  • I'm on Hold for the PXMD IPO.
  • Looking for more investing ideas like this one? Get them exclusively at IPO Edge. Learn More »

Little Asian boy stand by window, hand cover ears, face down, crying and screaming.

Jatuporn Tansirimas

A Quick Take On PaxMedica

PaxMedica (NASDAQ:PXMD) intends to raise around $8.5 million from the sale of its common stock in an IPO, according to an amended registration statement.

The company is developing treatment candidates for various neurodevelopment conditions.

PXMD is thinly capitalized, although it appears to have made some progress on its early trial activities.

Given the high risk profile of PXMD, I'm on Hold for the IPO.

PaxMedica Overview

Woodcliff Lake, New Jersey-based PaxMedica was founded to advance programs based on anti-purinergic therapies for East African HAT and 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.

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).

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.

Market & Competition

According to a 2018 market research report by Market Research Future, the global market for autism spectrum disorder (ASD) treatments 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:

  • CureMark

  • Yamo Pharmaceuticals

  • GW Pharmaceuticals

  • Zynerba Pharmaceuticals

  • QBioMed

  • Other major pharma firms

Management says there is 'no known cure for ASD, and no FDA approved medication to treat the core symptoms of ASD.'

Financial Status

PXMD's recent financial results are typical of a development stage biopharma firm in that they feature significant R&D and G&A expenses associated with its drug candidate development activities.

Below are the company's financial results for the past two calendar years:

Company Statement Of Operations

Company Statement Of Operations (SEC EDGAR)

As of March 31, 2022, the company had $49,383 in cash and $8.6 million in total liabilities. (Unaudited, interim)

PXMD IPO Details

PXMD intends to sell 1.5 million shares of common stock at a proposed midpoint price of $5.50 per share for gross proceeds of approximately $8.5 million, not including the sale of customary underwriter options.

No existing or potentially new shareholders have indicated an interest to purchase shares at the IPO price.

Assuming a successful IPO at the midpoint of the proposed price range, the company's enterprise value at IPO (excluding underwriter options) would approximate $72 million.

The float to outstanding shares ratio (excluding underwriter options) will be approximately 10.62%. A figure under 10% is generally considered a 'low float' stock, which can be subject to significant price volatility.

Per the firm's most recent regulatory filing, it plans to use the net proceeds as follows:

approximately $2.5 million for drug-substance procurement and supply-chain activities;

approximately $2.5 million for the clinical and regulatory development activities related to the HAT, ASD, ME/CFS and LCS indications;

up to $50,000 to repay the outstanding amounts due under the 2022 Notes that are not subject to the 2022 Convertible Note Conversion Agreements, to the extent they are not converted; and

approximately $2.0 million for working capital and general corporate purposes.

(Source - SEC)

Management's presentation of the company roadshow is available here until the IPO is completed.

The firm says it is not a party to any material legal proceedings.

Listed underwriters of the IPO are Craft Capital Management and R.F. Lafferty & Co.

Commentary About PaxMedica

PaxMedica is seeking a small IPO to advance its PAX-101 candidate through trials for various indications. It previously sought a $15 million IPO transaction in mid-2020.

For its lead candidate, management plans to seek U.S. FDA marketing approval for the treatment of East African HAT and then leverage such approval for expanding the scope of treatment to ASD, ME/CFS and LCS.

The market opportunities for the various conditions covered by the drug candidate are large, but growth characteristics are unknown.

The firm has disclosed no research or commercial collaborations, so is pursuing a 'go-it-alone' approach at this time.

Craft Capital Management is the lead underwriter, and there is no data on the firm's IPO involvement over the last 12-month period.

As for valuation, management is asking IPO investors to assume an enterprise value of around $72 million, higher than its previous IPO attempt at $59 million.

Now, as in its previous IPO, the company is valued at a far lower valuation than is typical for a biopharma firm at IPO.

Also, the firm is still very thinly capitalized, although it appears to have made some progress on its early trial activities.

Given the high risk profile of PXMD, I'm on Hold for the IPO.

Expected IPO Pricing Date: To be announced

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