Invex Therapeutics Due Diligence/Valuation
Hey guys, let me know if there is anything you would change in this report, I feel it provides a fairly accurate summary for investors.
Background
Invex Therapeutics is a clinical stage biopharmaceutical company incorporated on the 8th of March in 2019 which is repurposing an orphan drug (Exenatide) for initial use in the indication of Idiopathic Intracranial Hypertension (IIH). A basic understanding of the science behind the drug is that Invex has shown a GLP-1 receptor agonist to reduce intracranial pressure, which in turn improves a patients headache days and visual acuity. It has orphan drug designation in the EU and US for 10 years and 7 years respectively. The company has a market cap of $45,000,000 and cash reserves of $32,700,000 giving it an enterprise value of around $12,000,000.
Indication
Idiopathic Intracranial Hypertension is a disorder relating to raised intracranial pressure. It is classified as idiopathic because it doesn’t have a known cause, however over 90% of patients are overweight women of child bearing age so there could be a correlation between excess weight and raised intracranial pressure. Symptoms include headaches, migraines and blurred vision with blindness in severe cases. Incidence of IIH is correlated with an increasing BMI, this incidence is expected to grow along with obesity rates. The incidence of IIH has grown from 2 per 100,000 in 2002 to over 5 per 100,000 in 2021.
Exenatide
Exenatide is a glucagon-like peptide 1 receptor agonist. It was used to treat type II diabetes by decreasing fluid secretion in the kidney. It was formulated as Byetta or Bydureon by Astrazenecca for use in type II diabetes patients. The patents surrounding Exenatide expired in 2017 which has allowed Invex to reformulate Exenatide into its own drug Presendin.
Presendin
Presendin is a reformulation of Exenatide to be used in the treatment of IIH patients. It is being reformulated by Invex to lower ICP, which invex has demonstrated to lower headache days and improve visual acuity. Invex has not finalised the manufacturing and reformulation agreement yet but has provided initial guidance that it is intending to reformulate it as a slow release drug for ICP.
Competition
Acetazolamide
Acetazolamide is a medication used to treat IIH and other indications. It was developed in 1960 to treat glaucoma and has since been used ineffectively to treat IIH. Over 48% of patients had to withdraw from the trial due to intolerability (tingling in mouth, depression, nausea). In essence it isn’t a viable candidate to compete with Presendin. It also isn’t licenced to treat IIH but is used as the best alternative they currently have.
CSF Shunt
CSF shunt involves inserting a tube into the brain to drain out cerebrospinal fluid, this is very invasive, can get infected and is only a temporary solution in the best of cases. It does not seem to be any competition to Presendin.
There are no other drugs approved for the treatment of IIH.
Management
Board of Directors
The chairman of Invex Therapeutics is Jason Loveridge, he has been chairman since inception. Jason has a doctorate in Biochemistry and more than thirty years of experience in senior management positions in life sciences and investments in private and public companies. He is also the CEO of 4SC AG, a german listed oncology company.
Prof Alexandra Sinclair is a founder of Invex Therapeutics and a Clinician Scientist and Neurology Consultant in the Metabolic Neurology Group at the Institute of Metabolism and Systems Research, College of Medical and Dental Sciences, The University of Birmingham, UK. Prof Sinclair is a member or fellow of the British Medical Association, UK, the Association of British Neurologists, UK, the Royal College of Physicians, London, the Society for Endocrinology, the International Headache Society, the British Association of the Study of Headache, UK, the North American Neuro-ophthalmology Society and the European Headache Federation.
Dr Duthy has over 15 years of direct financial markets experience having worked in sell-side equity research, and senior executive roles across investor relations and corporate development. Dr Duthy is the Founder and CEO of Nemean Group Pty Ltd, a boutique corporate advisory and investor relations firm specialising in delivering value-added services across the life sciences, medical devices, healthcare, technology and emerging companies sectors. Prior to establishing Nemean in October 2018, Tom was the Global Head of Investor Relations & Corporate Development at Sirtex Medical Limited (ASX:SRX), which was sold to CDH Investments in September 2018 for A$1.9 billion and remains the largest medical device transaction in Australian corporate history. Prior to Sirtex, Tom spent ten years as a leading sell-side Healthcare & Biotechnology analyst at Taylor Collison Limited, focused mainly on small cap companies. During this time, approximately $200 million in equity capital was raised for selected portfolio companies. He is a Member of the Australian Institute of Company Directors (MAICD) and the Australasian Investor Relations Association (AIRA).
Mr McAuliffe is an experienced board director and entrepreneur who has over twenty years’ experience in the international biotechnology field. He has been involved in numerous capital raisings and in-licensing of technologies. He is a founder of several companies in Australia, France and the United Kingdom, many of which have become public companies. Mr McAuliffe has an Honours degree in Law, a Bachelor of Pharmacy degree and is the President of the Dyslexia – Speld Foundation WA (Inc). Mr McAuliffe is a current director of 4DS Memory Ltd.
Dr Baldwin is currently CEO and Managing Director of Opthea Limited (ASX:OPT; NASDAQ:OPT), a late-stage biopharmaceutical company developing a novel therapy to address the unmet need in the treatment of retinal eye diseases, including wet age-related macular degeneration (wet AMD). Under Dr Baldwin’s leadership, Opthea has rapidly advanced its ophthalmology program through Phase I and Phase II clinical development, was added to the S&P/ASX 300 in June 2020 and in October 2020 completed a $180 million initial public offering (IPO) and listing on the US NASDAQ exchange to progress two pivotal Phase III studies in wet AMD. Dr Baldwin is an experienced biotechnology executive, having over 20 years’ experience working on therapeutic drug development programs for cancer and ophthalmic indications. Prior to Opthea, Dr Baldwin was employed at Genentech (now Roche) as a postdoctoral researcher before moving to Genentech’s commercial division. Dr Baldwin also serves on the Board of Ausbiotech as Deputy Chair.
Ms Warren is a Chartered Accountant with over twenty years’ of corporate advisory, financial management and company secretarial experience. Ms Warren has coordinated and assisted in a number of corporate transactions, including acquisitions, divestments and raising funds via private and public equity markets. Ms Warren holds both a Bachelor of Laws and Bachelor of Commerce.
Top 20 Shareholders
The top 20 shareholders own 59.5% of Invex Therapeutics. Directors and management own 16.8%. Notable holders include Tattarang and Fifty One Capital. Tattarang don’t really matter as Andrew Forrest has a net worth of over $20,000,000,000 so $5,000,000 isn’t a vote of confidence. However Fifty One Capital have released swarths of information on Invex Therapeutics and are a vote of confidence when considering investing as they have a good track record so far with other biopharmaceuticals, notably Paradigm Biopharmaceuticals.
Clinical Trials
Pharmacokinetic (PK)
Passed.
Phase 1
Passed.
Phase 2
The phase II trial was the last trial that Invex has released results from. It involved 16 participants (8 placebo, 8 Exenatide) and was conducted over a 12 week period. Each participant had a device inserted into their brain to measure intracranial pressure. Over the course of the 12 weeks thousands of measurements were taken per participant which provided analysts with good data to examine. Three measurements were used, 2.5 hours, 24 hours and 12 weeks. Over these times participants saw anywhere from an 18%-21% reduction in intracranial pressure vs placebo, a 37% reduction (7.7 day) in headache days and a one line improvement in visual acuity.
The benchmark which would be considered efficacious was 10% for ICP, a 1.5 day - 2 day reduction in headache day per month and i'm not sure what it was for visual acuity but Opthea (ASX OPT) has been developing a drug specifically for visual acuity and I believe only saw a 4 letter improvement in visual acuity vs one whole line for invex which is the difference between driving and not driving. ← This could be incorrect but I heard Scott Williams from Fifty One Capital Management talking about it on his podcast and have not researched Opthea in depth so can’t verify this claim, in any event as far as Invex is concerned it is a secondary endpoint (FDA may not agree) so isn’t a core issue.
Phase II Results
Phase 3
Not started. Projected to cost $20,000,000 and have 300 participants. More details to come.
Concerns
Financial
No financial concerns for Invex. $26,000,000 raised at $1.30 fully funded for phase III trial after which will be looking for a buyout.
Legal
In 2019 the University of Birmingham entered into an agreement with a company called Exelogen for the exclusive right to negotiate a deal for the patents which the University owned over research done by the University under the guidance of Alex Sinclair, now CSO of Invex. Exelogen allegedly was supposed to pay $20,000 to the University of Birmingham for this exclusive right. 6 months passed and the university, upon not receiving payment from Exelogen, entered into an agreement with Invex Therapeutics and negotiated a deal to give the patent rights to Invex in exchange for shares in Invex. A few letters have been written over the years from Exelogen to the university as well as to Invex. Exelogen has reportedly filed a lawsuit against the university but nothing has appeared in the courts as of yet. They have sent a letter to Invex asking invex to amend claims relating to the patent IP granted by the university to invex made in their prospectus in 2019, however as far as I know invex has not amended these claims. Exelogen is allegedly using a no win no fee small claims lawyer to file their lawsuit, seemingly spending $0 to try and get a settlement/royalties/a piece of the pie from the University of birmingham. In any event Exelogen may take all the rights to the patents owned by Invex but we at PRT do not consider it a significant risk.
Drug
No obvious concerns regarding the most recent phase II trials. Primary and secondary endpoints were met with significant margins of safety on headache, ICP and vision. The main concern is regarding approval from FDA for phase III trials as they have suggested Perimetric Mean Deviation as the primary endpoint which Invex did not meet as an endpoint, EMA content with 1 phase III trial on headache so maximum 1 phase III trial in europe.
FINANCIALS
Invex Therapeutics is in a very strong position financially. They have a $45,000,000 market cap as at 05/08/2021 with $32,700,000 in cash and cash equivalents. Tom Duthy has forecasted around $20,000,000 expenditure for 1 phase 3 trial. This provides a very significant margin of safety and gives invex a current EV of between $10,000,000 to $15,000,000. For a pre phase 3 biopharmaceutical company which has demonstrated safety and efficacy on all 3 of the measured endpoints it would appear to offer significant upside for investment.
The share price history should also be considered, at a current share price of around $0.60 Invex sits at around 50% of its capital raise value of $1.30, presenting significant upside compared with a large portion of investors. This is a minor point in the long run but something to consider.
Economics of the drug
*I am going to preface this with the fact that I think the prevalence and incidence don’t sound correct, it seems odd that the incidence would be half the prevalence as incidence in yearly and prevalence is cumulative. Potentially many patients develop IIH and within 2-3 years manage to lose the weight etc. That being said this is data provided by either invex or fifty one capital management so as far as I know it is correct.*
*I would also like to preface this with the fact that these are values for 1 phase 3 trial in EU and US so assuming 2-3 phase 3 trials these values will differ. If we only go for 1 phase 3 trial in EU to start with divide these valuations by 1.667 to get just values for EU.*
Fifty One Capital assumed a prevalence of 10 per 100k in IIH and an incidence of 5 per 100k.
That results in an incidence of 53730 per year and a prevalence of 107460. Assuming a 50% penetration on new iih patients and a 20% penetration rate on existing iih patients that gives invex a buyout value of $2,500,000,000
