Origin Life Sciences Aims For $15 Million U.S. IPO

Summary

• Origin Life Sciences, Inc. has filed proposed terms for a $15 million U.S. IPO.
• The firm is developing a medical device for the treatment of various skin and tissue conditions.
• Given Origin Life Sciences, Inc.'s long road ahead to potential approval and high valuation expectations, I'll pass on the IPO.
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A Quick Take On Origin Life Sciences, Inc.

Origin Life Sciences, Inc. (OLSI) has filed to raise $15 million in an IPO of its common stock, according to an S-1 registration statement.

The firm is developing a medical device to treat various infections and regenerate tissue.

Given the long time horizon before potential medical device approval, high valuation expectations and other related risks, I'll pass on the Origin Life Sciences, Inc. IPO.

Origin Overview

Princeton, New Jersey-based Origin Life Sciences, Inc. was founded to develop its high-energy plasma device that delivers nitric oxide to targeted locations of the body.

Management is headed by founder, Chairman and CEO Michael Preston, who has been with the firm since its inception in 2010 and was previously at Price, Waterhouse, London, and has been a Fellow of the Institute of Chartered Accountants of England and Wales.

The device is called the "Ionojet" and it is in trials for the potential treatment of diabetic foot ulcers.

Notably, management plans to submit its PMA application to the U.S. FDA in Q2 of 2024, and device approval can possibly be obtained within six to fifteen months, or potentially not at all.

As of December 31, 2022, Origin has booked fair market value investment of $2.9 million from investors, including Square Table LLC, Isaac Anthony and Alexander Dolgopolsky, Ph.D.

Origin's Market & Competition

According to a 2022 market research report by Grand View Research, the global market for diabetic foot ulcer treatment was an estimated $4.7 billion in 2021 and is forecast to reach $7.9 billion by 2030.

This represents a forecast CAGR of 5.9% from 2022 to 2030.

The main drivers for this expected growth are an increased risk of obesity, poor glycemic control, and other lifestyle issues that will likely increase the incidence of diabetic foot ulcers.

Also, the chart below shows the global diabetic foot ulcer treatment market share by ulcer type:

Global Diabetic Foot Ulcer Treatment Market (Seeking Alpha)

The North American region accounted for the largest market share, while the Asia Pacific region is expected to register the highest growth rate through 2030, at 7.4% CAGR.

Major competitive or other industry participants include the following:

• SaNOtize Research and Development Corp.

• Edixomed Ltd.

• Other major pharma firms worldwide.

Origin Life Sciences, Inc. Financial Performance

Below are relevant financial results derived from the firm's registration statement:

Statement Of Operations (Seeking Alpha)

As of December 31, 2022, Origin had $554,379 in cash and $18.6 million in total liabilities.

Origin Life Sciences, Inc. IPO Details

Origin intends to raise $15 million in gross proceeds from an IPO of its common stock, offering three million shares at a proposed midpoint price of $5.00 per share.

In addition, the firm is registering for resale 775,900 shares by selling shareholders.

No existing shareholders have indicated an interest in purchasing shares at the IPO price.

Assuming a successful IPO, the company's enterprise value at IPO would approximate $182.6 million, excluding the effects of underwriter over-allotment options.

The float to outstanding shares ratio (excluding underwriter over-allotments) will be approximately 7.72%. A figure under 10% is generally considered a 'low float' stock which can be subject to significant price volatility.

Management says it will use the net proceeds from the IPO as follows:

to fund our ongoing clinical program for Ionojet, of which [an undisclosed amount] will specifically be used for completion of the reengineered design of the Ionojet technology and the submission of a new IDE for our pivotal trial in diabetic foot ulcers;

$1,649,452 for the redemption of all outstanding shares of the Series B Preferred Stock, including accumulated dividends at the simple annual rate of 20% per annum, based upon the stated value of $100 per share, calculated through March 31, 2023, which amount may be increased by a premium payment up to an additional $1 million pursuant to the terms of an agreement with the holder of the Series B Preferred Stock if the net proceeds of the initial public offering exceed $15 million;

$386,883 in full satisfaction of the amount owed under the LFEIF Note, including interest at the fixed simple rate of 20% per annum calculated through March 31, 2023, which note matures thirty (30) days after the closing of this offering;

approximately $160,000 in repayment of loans, $135,000 of which will be repaid to related parties ($50,000 to Michael Preston, our Chairman and Chief Executive Officer; $30,000 to David Dantzker, our Deputy Chairman and Chief Medical Officer; $42,000 to John Fernandes, our Chief Financial Officer; and $13,000 to Alexander Dolgopolsky, a holder of more than 5% of our outstanding capital stock and our former Chief Scientist);

approximately $725,000 in payment of deferred salaries over the 18 months subsequent to this offering, of which $250,000 will be paid to John Fernandes, our Chief Financial Officer; and

the remainder for working capital, research and development, general and administrative matters and general corporate purposes.

(Source - SEC.)

Management's presentation of the company roadshow is not available.

Regarding outstanding legal proceedings, the company has filed a claim against Magid Financial Services for breach of contract for Magid not purchasing shares of the company's stock for approximately $7.25 million.

The sole listed bookrunner of the IPO is Boustead Securities.

Commentary About Origin's IPO

OLSI is seeking U.S. public capital market funding to advance its medical device through the trial process.

The company has plans to submit its PMA application to the US FDA in Q2 of 2024 and device approval can possibly be obtained within six to fifteen months, assuming it proves sufficiently safe and efficacious.

The firm currently plans to pay 20% annual rate to Series B Preferred stockholders, "payable in cash upon the redemption of such shares." The company does not plan to pay any other dividends and to invest any available earnings back into its growth and working capital requirements.

The market opportunity for treating diabetic foot ulcers is large and expected to grow at a moderate rate of growth through 2030.

Boustead Securities is the lead underwriter and IPOs led by the firm over the last 12-month period have generated an average return of negative (73.6%) since their IPO. This is a bottom-tier performance for all major underwriters during the period.

Risks to the company's outlook as a public company include its thin capitalization, high debt load and regulatory risks.

As for valuation expectations, management is asking investors to pay an Enterprise Value of approximately $183 million despite being at a very early stage of development and several years away from potential product marketing approval.

Given the long time horizon before potential medical device approval, high valuation expectations and other related risks, I'll pass on the Origin Life Sciences, Inc. IPO.

Expected IPO Pricing Date: To be announced.

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such 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.