The technical complexity behind biotech and life science innovations often keeps retail investors from benefitting from their stocks’ meteoric rises.
Whether it’s unfamiliar terminology, overwhelming quantities of data, or the inability to assess value in highly specialized sub-sectors, many resort to indexed ETFs that include as many losers as winners, or to removing healthcare from their circle of competence altogether, unnecessarily leaving portfolio-enhancing returns on the table.
The solution to this conundrum is to identify seasoned capital allocators that combine 1) deep expertise in healthcare and M&A, 2) a keen eye for disruptive assets in growing markets, and, ideally, 3) a holding company structure that enables diversified investments and saves investors the high management and performance fees associated with active funds. Slated to begin trading on the TSXV in Q4 2023, Medicus Pharma (TSXV:MDCX) represents a rare candidate that delivers on all three counts.
Ushering leading-edge healthcare solutions to market
Medicus invests in and accelerates disruptive life science and biotech companies developing mid-stage pharmaceuticals and medical devices. Mid-stage in this case means Phase-II-ready assets that could benefit from the company’s capital and expertise.
Medicus’ allocation framework does not rely on specific EBITDA, revenue or profitability multiples because of its focus on candidates’ potential for improving quality of life and achieving regulatory approval. While the company does establish projections for making money upon full commercialization, it’s only upon a demonstrated proof of concept that revenue would enter the picture, either through a strategic buyer or continued in-house development.
“Our strategy is thesis- and data-driven,” Dr. Raza Bokhari, Medicus Pharma’s CEO and executive chairman, told Stockhouse in a recent interview. “We only approach companies that have a more than reasonable promise to alleviate human suffering while creating top-line revenue, bottom-line profitability and accelerated returns for our shareholders.”
“In modern-day drug R&D, Big Pharma just focuses on the D,” added Dr. Edward Brennan, Medicus’ chief medical officer. “Research has gotten so specialized that it would be impossible for Big Pharma to execute it under their roofs. This means there are thousands of small companies, like those Medicus owns and will own, working to solve particular unmet needs with novel therapies.”
Medicus’ recent public listing – by way of a business combination and concurrent US$6 million-US$12 million financing with its first acquisition, SkinJect – offers exposure to a multi-billion-dollar opportunity through dissolvable microneedle patches, which deliver therapeutics through the skin to treat certain cancers and pre-cancerous skin lesions. The acquisition would set the stage for Medicus to establish itself in the skin disease space before expanding its playing ground into inflammation and other prospective vectors.
Before we examine SkinJect’s ability to improve patient outcomes while generating shareholder value, let’s delineate why Medicus’ chief executives are tailor-made to identify more value-added solutions as the TSXV listing expands access to capital and diversifies its investor base.
An elite team of finance and healthcare veterans
Learned investors park their hard-earned dollars with investment managers whose specialized and extensive expertise allows them to sleep well at night. Medicus Pharma’s executive team certainly fits the profile, with decades of experience validating value propositions behind novel pharmaceuticals, biologics and combination devices, as well as guiding them through clinical evaluation, regulatory approval and commercialization.
Dr. Bokhari is a physician, serial entrepreneur and an experienced aggregator and optimizer of life science, healthcare services and pharmaceutical R&D companies, both as start-ups and public securities. His diverse background of nearly 30 years, from services to diagnostics to therapeutics, has afforded him a familiarity with raising capital across public offerings, private equity, venture capital and leveraged debt partners, all of which strengthens Medicus’ long-term ability to grow and thrive:
- Dr. Bokhari’s most recent notable role is as the previous CEO and executive chairman of FSD Pharma (CSE, NDAQ: HUGE), where he pivoted the company out of medicinal cannabis and into clinical-stage pharmaceutical R&D, a transition marked by a NASDAQ listing in January 2020 and nearly US$100 million in institutional capital raised to fuel expansion.
- His early success stems from re-capitalizing and selling strategic distressed healthcare assets, generating triple-digit internal rates of return for investors.
Dr. Brennan brings more than 25 years of drug development research to the table across multiple therapeutic areas, including immunology, oncology, cardio-vascular, metabolism and GI. This includes senior medical leadership roles at Johnson and Johnson, Pfizer, GlaxoSmithKline (GSK) and IndiPharm, where he oversaw teams responsible for all phases of clinical research, as well as interfacing with regulatory authorities. As Medical Director at Wyeth and GSK, Dr. Brennan led clinical development programs resulting in 10 FDA drug approvals.
Medicus Pharma’s executive team is further strengthened by:
- President Carolyn Bonner, whose more than 15 years as a healthcare executive span an accomplished track record in sales, marketing, operations, corporate partnerships, fundraising and strategic planning. Her previous roles include president and CEO of Parkway Clinical Laboratories, a 50-year-old CLIA certified in-vitro diagnostic laboratory; sales executive at Inform Diagnostics (formerly Lakewood Pathology Associates); director of business development at Rosetta Genomics (ROSGQ); and director of corporate development at Building Beyond BRIC Investment Fund.
- Chief Financial Officer James Quinlan, a certified public accountant and financial executive well versed in tax, auditing, M&A and financial planning services, as well as advising companies in the healthcare, technology and financial spaces. His previous roles include president of Trinity Financial Advisors, a wealth management firm, and partner and regional leader at Wipfli, a national accounting firm.
- Director Frank Lavelle, whose more than 40 years of experience as a president and CEO of healthcare technology companies includes tenures as CEO of Siemens Health Solutions and Symphony Health Solutions
- Director William Ashton, a former senior pharmaceutical executive with more than 35 years at Amgen
- Director Bob Ciaruffoli, a previous chairman and CEO of accounting and advisory firm ParenteBeard/Baker Tilly
- Director Dr. Larry Kaiser, the managing director of the Healthcare Industry Group at Alvarez and Marsal, and previous president and CEO of the Temple University Health System
- Director Barry Fishman, an accomplished CEO and executive of several pharmaceutical companies, including Teva Canada and Elly Lilly, Canada
It’s this solid foundation of drug development and capital markets know-how that led Medicus management to acquire SkinJect, a potentially multi-bagger asset, for which the company signed a definitive purchase agreement in March 2023.
A less painful, less invasive skin cancer treatment
SkinJect, now Medicus’ wholly owned subsidiary, is a development-stage biotech and life science company offering a non-surgical treatment for basal cell and squamous cell skin cancer, as well as other cancer types contingent on ongoing clinical trials.
The solution’s key advancement, a patented dissolvable microneedle (<1,000 µm in length) patch, administers a chemotherapeutic agent transdermally to kill tumor cells. Transdermal drug delivery avoids certain harmful effects of oral and systemic delivery, including large swings in pH, extensive enzymatic activity, liver metabolism and toxic side effects.
The device’s weekly 10-minute application over three weeks, with minimal anticipated pain or irritation, represents a substantial unmet need given the standard treatment of Mohs surgery, which, although effective, can take hours, entails high cost and often requires subsequent reconstructive surgery because of the procedure’s tendency to create deep craters in the skin.
SkinJect acquired exclusive worldwide development and commercial rights to the microneedle patch – covering any skin condition other than acne – from patent holders University of Pittsburgh and Carnegie Mellon University in April 2016.
The device positions Medicus Pharma to improve the lives of millions of patients, with more than 5 million basal cell cancer diagnoses in the U.S. every year. According to management’s analysis, this cohort represents a market slated to reach US$30 billion by 2030 – US$3 billion of which falls under SkinJect’s purview – marked by increasingly frequent occurrences in younger populations.
A successful Phase-I clinical trial
SkinJect completed a 13-patient, Phase-I study in March 2021 to evaluate dose-limiting toxicity and maximum tolerated dose of microneedle arrays containing Doxorubicin in patients with basal cell cancer.
While Doxorubicin, an anti-cancer drug, is cardio-toxic when administered systemically, study data supports the thesis that SkinJect’s transdermal injections avoid the drug’s toxic side effects while preserving its anti-cancer benefits.
Efficacy outcomes
- Of the 13 patients with doses between 25-200 micrograms, seven did not have complete needle dissolution, while the six with complete dissolution demonstrated a complete response with no remaining basal cell cancer
Safety outcomes
- Doxorubicin was well-tolerated in all patients
- No reports of moderate or severe adverse events
- No reported deaths, serious adverse events or adverse events leading to treatment discontinuation
These promising results led the FDA to quickly approve the protocol for a Phase-II study in September 2021. Although the study was put on hold because of financial constraints under previous management, Bokhari and Co. are keen on moving forward with it with an estimated multimillion-dollar capital infusion following Medicus’ TSXV listing.
One step closer to a painless non-surgical skin cancer treatment
SkinJect’s Phase-II trial seeks to establish a proof of concept for Doxorubicin microneedle arrays in basal cell cancer patients, including proper skin penetration and consistent delivery of the therapeutic agent to lesion sites.
The randomized, controlled, double-blind, multi-center study will treat 60-100 patients over approximately six months, with active recruiting likely beginning in 2024.
Once evidence substantiating a proof of concept is in place, Medicus intends to advance the microneedle patch for manufacturing at scale through a Phase-III study or a strategic asset sale.
The private-to-public valuation bump
As a public issuer, Medicus Pharma will offer shareholders exposure to a built-in mismatch between public company valuations and those of its private acquisition targets, the latter of which tend to be lower in comparison because of:
- The risks associated with their generally smaller size, including lack of talent and lack of capital, paving the way for Bokhari and Co. to apply their business expertise toward maximizing profitability and patient impact
- The private market’s lax regulatory oversight compared with public markets, allowing it to trade at a discount
At present, this discount is considerable at a roughly 9.37x difference in EBITDA multiples, with US$0-US$1 million EBITDA private biotech companies going for as low as 3.6x EBITDA as of June 2023, and valuation expert Aswath Damodaran estimating U.S. public biotech companies at a 12.97x EBITDA multiple as of February 2023.
Potential investors should expect their MDCX shares to reflect this bump as the public market sizes up SkinJect’s potential and accrue returns in excess of it as management onboards attractively priced acquisitions with clear use-cases in markets slated for long-term growth.
A glimpse into Medicus Pharma’s future
Medicus finds itself riding the initial gust of a global tailwind across the more than US$1 trillion biotech market. According to Grand View Research, growth is forecasted at a 13.96 per cent CAGR from 2023 to 2030 thanks to improved streamlining of regulation, approval, reimbursement and clinical study processes.
This trajectory bodes well for SkinJect as it furthers development and grows into its US$3 billion addressable market, while Medicus secures its next targets from an expanding pipeline of novel therapies with competitive advantages.
“We want to identify companies with promise, but if they are going to fail, we want to make sure they fail early,” Bokhari said. “Within the R of R&D, where our experience resides, this is critical to the intelligent use of shareholder dollars as we pursue compelling investment candidates.”
With multiple discussions ongoing with potential portfolio additions, Medicus is on its mark and ready to actualize its M&A strategy. Near-term goals include:
- Raising the aforementioned US$6 million to acquire SkinJect and go public. To date, Medicus’ Presidents’ List of investors has committed nearly US$4 million, affording it a pre-money valuation of US$25 million
- Identifying an acquisition target by year end
- Forming a medical advisory board to guide future operations
- Forming partnerships with strategic equity analysts, as well as retaining a sponsored analyst – likely Zacks Small Cap Research – within the first 30 days of trading
- Perpetually raising capital to catalyze M&A activity while attaining a minimum cash runway of six quarters by year end, and a minimum of 8-12 quarters by the first half of 2024
- Qualifying for a NASDAQ listing in the U.S. after gaining traction on the TSXV
The stars do not often align for investors searching for a ground-floor venture validated by expert executives, private capital and billions in potential market share for the strategic taking. The probability is even lower in the highly competitive drug R&D space, where years of patience, persistence and perseverance are required on top of a solid value proposition.
Interested investors that have read until this point should not take this opportunity for granted. As a turnkey solution to access the essential healthcare sector, Medicus embodies a balance between advancing quality of care and rewarding shareholder conviction with the potential to reach meteoric heights.
This is sponsored content issued on behalf of Medicus Pharma, please see full disclaimer here.