Is PaxMedica worth an investment?

 

Biotechnology company PaxMedica will try to jumpstart the market for new listings.

After a bumpy start to the year, new listings are gaining ground. This time around, PaxMedica, a clinical-stage biotech developing therapies for neurodevelopmental disorders, recently went public. The regulatory authorities have not yet approved any drug for the core indication of PaxMedica.

Although the underlying science is incredibly promising and has the potential to develop a unique therapeutic, PaxMedica is under significant fundamental pressure. Also, even science is not entirely bulletproof, with countless feasibility and safety questions remaining. Below are the main pros and cons to consider.

What does PaxMedica do?

PaxMedica is a clinical-stage neurological biotechnology company venturing into currently underserved markets. According to Form S-1 filed with the United States Securities and Exchange Commission (SEC), PaxMedica is focused on developing antipurinergic drug therapies (APT) to treat disorders with intractable neurological symptoms. The catalysts range from neurodevelopmental disorders, including autism spectrum disorders (ASD), to myalgic encephalomyelitis/chronic fatigue syndrome (ME/CFS).

The latter area has attracted a lot of interest due to the COVID-19 pandemic. As the Mayo Clinic mentioned, long-term symptoms of the SARS-CoV-2 virus include fatigue, fever and respiratory symptoms. In addition, certain disorders can flare up again after physical or mental exertion.

Specifically, PaxMedica wants to set a significant impulse with the APT cure. A little background: Purines are chemical compounds that metabolize to form uric acid. These compounds come in two forms: endogenous (or purines produced by the human body) and exogenous (purines ingested through food).

ASD is genetic and environmental

According to the National Library of Medicine, "both genetic and environmental factors cause" ASD. In addition, mitochondria and other metabolites "communicate cell health and danger to neighboring cells via purinergic signaling." Therefore, antipurinergic therapies could modulate this cellular communication, potentially producing beneficial health outcomes for ASD patients. In fact, other research suggests that APT therapies can correct autism-like traits. The scientific framework of PaxMedica thus builds on previous investigations into the mechanisms of neurological disorders.

The company's lead therapeutic is PAX-101, an intravenous formulation of suramin. According to UC San Diego Health, suramin is “a 100-year-old drug developed to treat African sleeping sickness and river blindness. Although it has also been studied for other diseases, including cancer, it is not approved for therapeutic use in the United States.” However, the researchers discovered that in a single intravenous dose, suramin produced a dramatic but transient improvement in the core symptoms of ASD. Currently, the Food and Drug Administration (FDA) has not approved a drug to treat the core symptoms of ASD, highlighting both the risk and opportunity behind PaxMedica's IPO.

What Analysts Are Saying About PaxMedica's IPO

Because this is a nanoscale IPO, Wall Street analysts have yet to comment on PXMD ​​shares. However, the basic ins and outs of the underlying company are relatively easy to decipher. On the optimistic side, PaxMedica bolsters its hopes with the fact that the FDA has not yet approved a therapeutic to treat the core symptoms of ASD. Therefore, the company that gets first to market with an ASD drug could make a huge profit.

For one thing, the overall addressable market is quite large. According to the Centers for Disease Control and Prevention, an estimated 5,437,988 (2.21%) adults in the United States have ASD." In addition, about 1% of the world's population - over 75 million people - suffer from this disorder. So a scientific breakthrough could be life-changing for people with ASD. The economic situation also justifies investments in ASD drugs. Fortune Business Insights reports that the market for the treatment and management of ASD will be worth $1.85 billion by 2021. Experts predict that this market could reach $3.17 billion by 2029, which is a compound annual growth rate (CAGR) of 7,

Guarantees do not exist

Of course, there is an opposite perspective to every investment thesis. Basically, biotech companies are risky in the clinical phase. While PaxMedica has made encouraging progress in its clinical trials, there are no guarantees it will progress to the commercialization phase. The corporate graveyard is filled with up-and-coming biotech companies that couldn't cross the finish line before the money ran out.

On a scientific level, while these studies support the hypothesis that "autism and other chronic diseases are fundamentally caused by metabolic disorders and are therefore treatable," the lead investigator on the applicability of Suramin in ASD - Dr. Robert Naviaux - suggested larger and longer clinical trials to really assess the viability of the drug. However, larger and longer clinical trials cost money that biotech companies can run out of if they disappoint their shareholders.

Finally, suramin-based therapeutics for neurological disorders may not be a panacea. As UC San Diego Health explained, suramin can be harmful if administered improperly. The Mayo Clinic lists a number of side effects that intravenous suramin therapies can cause.

PaxMedica potential

While certain IPOs appear more robust than others, the truth is that the free market makes the final decision on their valuation. As for PXMD ​​stock, the company has feel-good news that could easily captivate the meme stock crowd.

On the other hand, mass tends to increase over time. In other words, fundamentals ultimately matter. Given that PaxMedica is venturing into uncharted clinical territory, it will likely require future funding initiatives. However, if those initiatives amount to dilutive measures like stock sales, PXMD's long-term shareholders could suffer the most.

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