Post-placement indigestion an opportunity?

Both IXC and PAR (Paradigm Biopharmaceuticals) are repurposing existing drugs, successfully completed Phase II trials, completed recent 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 vs IXC +11.5%.

This prompted me to look at IXC and compare to PAR, looking at the journey, comparing catalysts and Mkt Cap.

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 - my description -  pressure in the skull related to obesity, leading to migraine, vision issues, in some cases blindness amongst other issues), 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 for OA.
  
• 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 IIH market, and if successful the size of other indications the drug may be suited to over the longer term, 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 PAR and IXC.

IXC - 12 Month Chart vs placement price $1.30

PAR - 12 Month Chart vs placement price $1.30

Other Points

• The approach to raising capital 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 of the argument.
  
• 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 shares which come out of escrow 24m from listing (July 2021)

Other resources

There are two good posts on Livewire covering both PAR and IXC, worth reading

• Fiftyone Capital (IXC) posted a note prior to the release of the phase II trial results. Still relevant. (Article)
  
• Collin St Value Fund  (PAR) posted a note post the recent capital raise. (Article)
  
• IVX Phase II results explained - short youtube video - Prof Alex Sinclair presents Phase II clinical trial results - May 2020
  

Summary

Both PAR and IXC may offer considerable value if they were able to successfully navigate the critical Phase III and commercialisation milestones. Repurposing well known existing drugs can have an advantage in managing some of those risks, particularly around safety. However, they can come with added complexities around licencing the parent drug and competition.  I feel that there is more for the market to discover in the IXC story, then the better understood PAR. IXC lacks the attention of the blockbuster OA market, however, picks up the benefits of the Orphan Drug market for IIH, and it is possible that any potential acquirers (in a company sale scenario) see other indications outside IIH as attractive and substantial. 

ASX Releases

• IXC - May 2020 Presentation

• IXC - Phase II Trial results May 2020

• PAR - Corporate Presentation March

IXC - Key Points on Orphan Drug Status 

IXC - Catalysts

Disclosure

The author has participated in both recent placements in PAR and IXC, and owns shares in the companies mentioned in this desk note. 

Author 

Thomas Schoenmaker
Head of Wealth Management

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