Among the companies that go to the IPO, there are companies with a finished product or service, and there are those whose product is only at the development stage. In fact, they have no revenue, the cash flow is provided by grants from the project donors. By investing in these types of companies, you are investing in the future. Of course, such investments are fraught with high risk, but they promise super-profitability if successful.
These are the companies that Inhibikase Therapeutics, Inc., which will go public on December 22nd on NASDAQ with the ticker IKT… Bidding will begin the next day, December 23rd. Let’s understand the business features of Inhibikase Therapeutics, Inc.
The uniqueness of Inhibikase Therapeutics, Inc.
The company is researching a drug to treat Parkinson’s disease and its gastrointestinal complications.
The company’s flagship drug is IkT-148009, which will go into testing on volunteers next year. At the current stage, a full cycle of drug testing on animals has been carried out.
A feature of IkT-148009 is that it penetrates the brain at the molecular level and fights directly with the source of the degradation processes of some of the neurological mechanisms. During trial injections of animals, IkT-148009 was shown to be effective in slowing down the development of Parkinson’s disease and partially restoring lost brain functions. However, it must be understood that when tested in humans, we may not see such positive changes. There is also a risk of “reverse effect” when the drug will only accelerate the rate of development of the disease.
Now they are trying to treat Parkinson’s disease by removing plaque proteins from the brain, which are believed to be the cause of the development of this neurodegenerative disease. Such approaches have not been proven to be effective in practice. Inhibikase Therapeutics, Inc. went the other way and are already ready for human trials, as we wrote above. In the course of their research, the key causative agent protein c-Abl was found. It is with him that IkT-148009 fights, which allows not only to slow down the development of the disease, but also to reverse some of its negative consequences.
In addition, a new drug IkT-001Pro is under development. It is planned that in addition to Parkinson’s disease, it will also be used in the treatment of myelogenous leukemia (a special form of cancer of the blood and bone marrow). Thus, the company plans to significantly expand its potential market.
It is assumed that the main market for the company at the first stage of development will be the United States. Currently, in the United States, Parkinson’s disease affects between 700,000 and 1,000,000 people. Every year the number of cases in the country increases by 60,000 people. According to the World Health Organization (WHO), there are 3.7 million such patients in the world with an annual growth rate of about 300,000.
According to various estimates, the market for the fight against Parkinson’s disease in the United States will reach 6 billion USD by 2025. In total, by 2025, global demand may reach about USD 22 billion.
Inhibikase Therapeutics, Inc.’s strategy to capture the market is based on the following principles:
- Carrying out a study of the biochemistry of proteins that act as catalysts for the development of the disease.
- Active use of the patented method of treatment on volunteers.
- Development of a business line for the treatment of leukemia.
Due to the lack of data from human clinical trials, it is difficult to predict the company’s market share. Now let’s take a closer look at how things are with finances at Inhibikase Therapeutics now.
Inhibikase Therapeutics, Inc. financial performance
Inhibikase Therapeutics, Inc. does not generate profits, and it really has no revenue.
The bulk of the company’s revenue comes from grant funding.
Proceeds from grants decreased by 40.2% in the first nine months of the current year in comparison with the previous year (from USD 882.46 thousand to USD 528.05 thousand). The decrease in funding was caused by the downturn in R&D activity. We can see this from the drop in research and development expenses by 70.8% in the first nine months of this year against the same period last year (from USD 1.62 million to USD 666.86 thousand).
As can be seen from the reporting, this trend began back in 2018. Therefore, we can conclude that the reduction in grant funding is caused by the degree of readiness of the drug, and not by its vague prospects on the market. It should be noted that the company is not ready to give a forecast about the start of drug sales.
We’ll talk more about the disadvantages and advantages of the company below.
Advantages and disadvantages
When we have complete knowledge of the company’s business model, financial position and market outlook, it is time to outline the strengths and weaknesses of Inhibikase Therapeutics, Inc. The following factors speak in favor of investing in this company:
- The company is developing a unique treatment for Parkinson’s disease.
- The potential market will grow to USD 22 billion by 2025.
- The company’s research suggests leukemia therapy will diversify the business.
The risk factors that Inhibikase Therapeutics notes in the prospectus are:
- Lack of revenue, which does not allow us to talk about net profit in the same way.
- There are no guarantees that the drug IkT-148009 will be registered and will go on sale.
- Potential liquidity shortage of the company’s shares, which will create problems with their sale if necessary.
IPO details and valuation
Inhibikase Therapeutics will have its initial public offering on the NASDAQ on December 22, 2020. The price range is 10 to 12 USD per share. It is planned to attract USD 21.2 – 24.7 million. Capitalization after the IPO will amount to USD 116 million. The placement underwriters were ThinkEquity and Paulson Investment Company, LLC.
The company plans to use the raised funds for the first phase of clinical trials of the drug IkT-148009 on healthy elderly patients. In addition, it is planned to pay off the debt and finance general corporate expenses.
If the trials are successful and the company’s drug goes on sale, the potential market in the United States alone will amount to USD 6 billion by 2025. Capitalization growth potential (upside) is about 1000% if the market estimates Inhibikase Therapeutics at 5 revenues (USD 1.2 billion / USD 116 million * 100%).
Investments in this company are to a certain extent social in nature. Because the funds of investors are planned to finance a unique method of combating the still unconquered Parkinson’s disease. Taking into account all of the above, we recommend that you consider this company for investment in the long term, but not more than 5% of the working capital.
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