Health

IPO Update: Intrinsic Medicine Aims For $25 Million IPO (Pending:INRX)

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A Quick Take On Intrinsic Medicine

Intrinsic Medicine (INRX) intends to raise $25 million from the sale of its common stock in an IPO, according to an amended registration statement.

The company is developing treatments for various GBA and inflammatory diseases.

Given the firm’s preclinical stage of development, the lack of in-house research and large selling shareholder registration, I’m on Hold for the IPO.

Company & Technologies

Seattle, Washington-based Intrinsic was founded to use synthetic human identical milk oligosaccharide molecules to treat irritable bowel syndrome and other inflammatory diseases.

Management is headed by co-founder, Chairman and CEO Alexander Martinez, who has been with the firm since inception in 2018 and was previously Director, Corporate Development of Ionis, a biopharma company developing RNA-targeted therapeutics.

The firm’s lead candidate, OM002, is expected to begin Phase 2 trials in 1H 2023 in Australia for the treatment of IBS – C (with constipation) and IBS – D (with diarrhea) diseases.

Below is the current status of the company’s drug development pipeline:

Drug Development Pipeline

Drug Development Pipeline (SEC EDGAR)

Intrinsic has booked fair market value investment of $12.6 million from various financial instruments as of December 31, 2021 from investors including SOSV.

Intrinsic’s Market & Competition

According to a 2019 market research report by Grand View Research, the global market for irritable bowel syndrome treatments was an estimated $1.5 billion in 2018 and is forecast to reach $3.2 billion by 2026.

This represents a forecast CAGR (Compound Annual Growth Rate) of 10.1% from 2019 to 2026.

Key elements driving this expected growth are a growing prevalence of the disease and increasing adoption of drug treatments by patients.

Also, below is a chart showing the historical and projected future growth trajectory of the US IBS treatment market by segment:

Irritable Bowel Syndrome US Market Size

Irritable Bowel Syndrome US Market Size (Grand View Research)

Major competitive vendors that provide or are developing related treatments include:

  • Finch Therapeutics Group

  • 4Dpharma

  • Seres Therapeutics

  • synlogic

  • Kaleido Biosciences

  • Evelo Biosciences

  • Ironwood Pharmaceuticals

  • AbbVie

  • Sand Pharmaceuticals

  • Xiling Lab Pharmaceutical Co.

  • Boston Pharmaceuticals

  • Salix Pharmaceuticals

  • Sebela Pharmaceuticals

Intrinsic Medicine Financial Status

The firm’s recent financial results are mostly typical of a development stage biopharma in that they feature no revenue and growing R&D and G&A expenses associated with its research efforts.

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

Statement of Operations

Statement of Operations (SEC EDGAR)

As of December 31, 2021, the company had $2.8 million in cash and $17.8 million in total liabilities.

Intrinsic’s IPO Details

INRX intends to sell 4.17 million shares of common stock at a proposed midpoint price of $6.00 per share for gross proceeds of approximately $25 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 and certain selling shareholders may sell up to 13.6 million shares after the IPO transaction.

Assuming a successful IPO at the midpoint of the proposed price range and no selling shareholder stock sales, the company’s enterprise value at IPO (excluding underwriter options) would approximate $44.4 million.

The float to outstanding shares ratio (excluding underwriter options) will be approximately 36.9%. 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 $10.0 million to advance the development of OM002, including initiating our planned Phase 2 clinical trial in patients with IBS-C in Australia and expanding this clinical trial under an IND in the United States upon completion of our below-referenced confirmatory, IND-enabling toxicology study;

approximately $1.0 million to complete our planned confirmatory, IND-enabling toxicology study to support our IND filing for OM002; and

the remainder for clinical development of our drug candidates and other research and development activities, working capital and other general corporate purposes, including the additional costs associated with being a public company.

We believe, based on our current operating plan, that the net proceeds from this offering and our existing cash will be sufficient to fund our currently planned operations for at least the next 20 months;

(Source)

Management’s presentation of the company roadshow is availablehere until the IPO is completed.

Regarding outstanding legal proceedings, an in-licensed EPO (European Patent Office) patent, which the firm obtained rights through a license agreement with Glycosyn, has been the subject of a post-grant opposition by two firms and subsequent revocation by the EPO. Patents have initiated an appeal of the revocation and the next hearing is scheduled for July, 2022.

Listed bookrunners of the IPO are Spartan Capital Securities and Revere Securities.

Commentary About Intrinsic

INRX is seeking public investment to advance its pipeline through and into clinical trials.

The firm’s lead candidate, OM002, is expected to begin Phase 2 trials in 1H 2023 in Australia for the treatment of IBS – C (with constipation) and IBS – D (with diarrhea) diseases.

The market opportunity for treating irritable bowel syndrome variants is moderately large and is expected to grow at a strong rate of growth over the coming years.

Management has disclosed no major pharma firm collaboration relationships.

The company’s investor syndicate does not include any well known life science venture capital firms or pharmaceutical companies.

Spartan Capital Securities is one of the book-running managers and IPOs led by the firm over the last 12-month period have generated an average return of negative (77.8%) since their IPOs. This is a bottom-tier performance for all major underwriters during the period.

Notably, selling shareholders will register 13.6 million shares, which may be sold after the IPO closes and is an unusual term for a biopharma IPO. It represents a large portion of outstanding shares and if shareholders sold the shares on the open market, it could result in extreme downward price pressure.

As for valuation, the IPO is being valued by management at significantly lower than the typical range for a biopharma firm at IPO.

Given the firm’s preclinical stage of development, the lack of in-house research and large selling shareholder registration, I’ll pass on the IPO.

Expected IPO Pricing Date: May, 2021.

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