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INVEX THERAPEUTICS (IXC $IXC) |  DESK NOTE | Post-placement indigestion an opportunity? | Mkt Cap F/Diluted A$131.2m ($1.455)
 

EVENT: Post-placement trading (A$26m @ $1.30), cheap stock/profit-taking capping price?

Intro
 
Both IXC and PAR (Paradigm Biopharmaceuticals) are repurposing existing drugs, successfully completed Phase II trials, completed capital raises (both coincidentally at $1.30) and will look to have completed Phase III trials 2H 2023. PAR, raised a little earlier than IXC, and has since risen 152% to $3.28.
 
This prompted me to look at IXC and compare to PAR, looking at the journey, comparing catalysts and Mkt Cap. 
 
About
 
PAR and IXC are both repurposing existing well-known drugs for new indications. PAR is repurposing Pentosan Polysulfate Sodium (PPS) branded as Zilosul, that has historically been used as an anticoagulant and anti-inflammatory, for the treatment of Osteoarthritis (OA) in the knee; IXC is repurposing Exenatide for the treatment of IIH (idiopathic intracranial hypertension), and other similar conditions, and has branded its proprietary reformulated dosage form as Presendin. Both have just completed Phase II trials with convincing results, and both are scheduled to complete Phase III at approximately the same time, 2H 2023.
 
IXC does not have the profile of PAR which may be on the cusp of an ASX300 inclusion. It was floated out of the West, better known for resource deals, has a smaller market cap, and less liquidity than PAR. But perhaps that is the opportunity? There are a number of reasons to take a closer look at IXC.
 
Key Points (IXC v PAR)

  • IXC Has Orphan Drug status for IHH. This means single phase III trial and protections from similar drugs when in the market (US/EU). PAR does not.

  • Both are well-capitalised post raise, but IXC should burn through significantly less in the single-phase III trial, A$16m vs A$80m for PAR.

  • The market for IHH might be 10-15% of the market share PAR is targeting for OA, but IXC faces no competition as there are currently no treatments. This gives them an advantage in pricing, speed to market, protections – they have it to themselves.

  • Phase II to Phase III always poses risks – but IXC exceeded its primary endpoints in Phase II by going to the expense of implanting a monitoring device in the skull of patients, to accurately monitor pressure. Whilst expensive, it points to very robust data from the Phase II trial. This, in turn, gives a high(er) level of confidence as they move to a single phase III trial.

  • PAR is competing in the blockbuster OA market; this explains why it is approximately 6 x’s IXC’s market cap. However, there is evidence to suggest that the market might be underestimating the size of IXC’s IHH market, and if successful the size of other indications the drug may be suited to in the stroke/brain trauma market which is significant (IXC’s drug has been shown to rapidly reduce pressure in the skull)


    Below is a brief comparison matrix of the PAR and IXC.

Code
PAR.ASX ($3.24)
IXC.ASX ($1.455)
Company
Paradigm Biopharmaceuticals Limited.
Invex Therapeutics Ltd
Market Cap (Fully Diluted)
 $736.9m  
 
$132.6m
PAR has ~6x's larger mkt cap
Both Repurposing Existing Drugs





 
PAR is repurposing Pentosan Polysulfate Sodium (PPS) branded as Zilosul©) that has historically been used as an anticoagulant and anti-inflammatory, for the treatment of Osteoarthritis (OA) in the knee. 




 
IXC is repurposing exenatide for the treatment of IIH (idiopathic intracranial hypertension), and other similar conditions and has branded its proprietary reformulated dosage form as Presendin.

Exenatide (currently marketed by AstraZeneca) was developed as a treatment for type II diabetes (brand name, Byetta) and was approved in Europe in 2006 and the USA in 2005.

What Are they looking to treat











 
Osteoarthritis (OA), in the knee, which is a well-known condition,  and a lesser-known illness mucopolysaccharidoses(MPS).










 
Idiopathic intracranial hypertension (IIH), a debilitating condition of an unknown cause which mostly affects obese women, causing severe migraine-like headaches and vision impairment, and in the longer term, blindness in some.

Second Orphan indication in Idiopathic Intracranial Hypertension (IIH) – Without Papilloedema (WOP), a subpopulation of around 1225 patients or a TAM of A$95m p.a.

Other markets to be considered can include the post-trauma patient to reduce swelling/pressure in the brain (in an emergency setting)

Market Size















 
PAR estimates that if they can hit 10% of the addressable OA market in the US, that is US$9b p.a.

While PAR's drug for OA is a larger/blockbuster market, it also attracts far greater competition. This may lead to issues gaining market penetration, pricing, and challenges, patent challenges. The treatment of OA does not have orphan drug protection.
 
So while the OA market is larger, the risk in market penetration might be considered greater at this stage.





 
IXC estimate that their addressable market in the EU/USA for IIH is A$1.6b p.a. or ~US1.04b (using an exchange rate of $0.65).

IHH market currently has no available treatments, an Orphan drug status. This status often sees far greater pricing power, and greater take up the drug as there are no alternatives.

IHH's market potential may be larger than we think  - "We are also confident that with strong science behind the company’s method of action that it is also potentially the gateway to far larger indications with bigger markets that have similar symptoms (increased pressure in skull/headaches). These include larger indications such as acute stroke and traumatic brain injury (Fifty One Capital)"
Phase II Results









 
Met Primary Endpoints

OA Phase 2b trial (n=112) met primary, secondary and exploratory endpoints (included pain, function, BML and biomarkers).





 
Met all Primary Endpoints

for a >10% reduction of Intracranial Pressure1 (ICP) at 2.5 hours (p<0.048), 24 hours (p<0.03) and 12 weeks (p<0.058)

Statistically significant improvement in Key Clinical Endpoints
▪ 7.7 day reduction in Monthly Headache Days
▪ Visual acuity improvements equivalent to 1 full line on chart
Orpahn Drug Status / Special access











 
Zilosul granted FDA approval under Expanded Access Program (EAP) to treat 10 patients suffering from OA –Initiated February 2020. The drug is getting social media/coverage being used by some ex-NFL players. There are no orphan drug protections for the treatment of OA. There is a risk, if successful, that competitors may challenge the patents over the formulation of the drug. Bell's note says "The company has several patents over the formulation and dosing on iPPS for the treatment of OA. The validity of these patents is highly likely to be challenged at some point, especially if the drug is a commercial success."

The smaller indication, MPS, has Orphan status which requires only 1 phase III trial. 
As there are no existing treatments for IHH, it is classified as an Orphan Drug indication. The benefit of this is that only one Phase III trial would be required. Also, it gives protection from competitors registering alternate forms of the drug.









 
Phase III commencement 

 
Planned FDA IND for Phase 3 trial in OA in 2020, anticipate US trial readout Q3 CY 2022.

The OA trial is forecast to cost A$80m
Plans to commence Presendin™ Phase III in 1H CY2021.  Topline results expected in 2H 2023.

Phase III registration study in IIH -
A$16m
Cash & Balance Sheet 8th April - raised A$35m via a Placement at A$1.30 per share.

A$108m cash on balance sheet post raising – fully funding company until the end of 2022 
22nd May  - raised A$26m at $1.30.

$36.5m on hand and the capital raise to fully fund Phase III clinical trial for Presendin™ through to top-line results in 2H 2023.
 

Other Points
 

  • The approach to the capital raise between PAR and IXC was different. PAR bit the bullet, with a depressed price for funding certainty early on. IXC elected to go into a trading halt and release the Phase II results and funding announcement at the same time. You can hypothesis if it makes more sense to have let IXC trade, however, it was also a certainty they would raise money, so perhaps the approach works both sides. 
     

  • Market Cap and liquidity have worked for PAR. It is on the radar, IXC is only starting to be noticed. PAR's Turnover since the capital raise has averaged A$6.5m/day, and is on watch for an ASX300 inclusion.

    IXC has averaged $855k per day since the raise. Less compulsion for Insto ownership, which can change. 

    Minderoo Group (Twiggy Forrest's investment arm) is the largest shareholder outside management. They were also a cornerstone investor in the last round. "The Company received cornerstone commitments totalling $10.5 million from existing investors, including $5.0 million from Tattarang (formerly Minderoo Group)."
     

  • Restricted Securities - IXC has 21.06m which come out of escrow 24m from listing (July 2021)


Other Reading

  • Fiftyone Capital posted a note on Livewire (Article) prior to the release of the phase II trial results. Still relevant and worth reading. 
     

  • Collin St Value Fund posted a note post the recent capital raise on Livewire (Article). Also worth reading, and paints the upside picture if they are successful. 

    (Articles also cover what they consider major risks)

Summary

Both PAR and IXC may offer value if they were able to successfully navigate the critical Phase III and commercialisation milestones. I feel that there is more for the market to discover in the IXC story, than the better known PAR. IXC lacks the attention of the blockbuster OA market, however picks up the benefits of the Orphan Drug market for IHH, and it is possible that potential acquirers (in a company sale scenario) see other indications outside IIH as attractive and substantial. 


Announcements


 

Disclosure 

The author has participated in both recent placements in PAR and IXC, and owns shares. 

Best, 
Tom

Thomas Schoenmaker
Head of Wealth Management
Director

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