Phoenix Pharmalabs is raising at a $26,790,283 valuation cap, a slight increase over its previous valuation of more than $23 million in 2018. This added valuation represents the company’s success in peer-reviewed animal trials, but remains extremely high for a startup at this early stage of development. Thus, the company’s price score is its lowest across all five metrics.

The global pain relief market was valued at $55.275 billion in 2018, with that number expected to grow at a 4.73% CAGR from 2019 through 2025. The global opioid market represents a smaller niche expected to reach $29.4 billion in value by 2026 with CAGR of only 1.8%. More than 50% of opioid revenue in the world came from North America in 2018. Obviously, opioids have suffered something of a public relations fiasco, leading to its significantly slower growth rate. However, Phoenix’s compound might not only replace traditional opioids — and so corner that market — its safety and efficacy could help it break into the global pain management market as well.

Not only could the drug replace traditional painkillers, it might also serve as a treatment for opioid and cocaine addiction. The drug addiction treatment market as a whole is expected to reach $31.17 billion by 2027 — up from $16.47 billion in 2018 — at a respectable CAGR of 7%. Phoenix also plans to step into a miniscule veterinary pain management market ($1.15 billion in 2018) and expand it by offering what may be the only safe treatment for pets with moderate to severe pain. 

Phoenix PharmaLabs is looking to address multiple verticals — most of which have strong market values and growth projections. As a result, the market score for Phoenix is quite strong.

Phoenix is helmed by a five-person team of professionals and doctors, many of whom have personal relationships with people afflicted by the addiction crisis. Chief among them is President and CEO William Crossman, whose stepson has battled opioid addiction for almost two decades. Crossman himself has an MBA from UC Berkeley and has served with Phoenix for the past ten-and-a-half years. He’s spent the last two decades launching early stage technology companies. Before that, he joined a group of Japanese consultants to introduce the philosophy of Kaizen — lean business practices — to U.S. companies and served as CFO of Otis Elevator. 

Dr. John Lawson is a co-founder, chairman, and Chief Scientific Officer. The company’s other co-founder, Dr. Lawrence Toll, serves as a board member and Chief Neuropharmacologist. The two worked together at the Stanford Research Institute conducting research on analgesic compounds and potentially non-addictive opioids. Lawson served as the senior Medicinal Chemist and project manager for two decades before leaving to start Phoenix. He holds a Ph.D. from the University of Oregon. Dr. Toll — who has authored more than 130 peer-reviewed papers — has a Ph.D. in biological chemistry from UCLA, as well as two Postdoctorates in biological chemistry and pharmacology from UCLA and Johns Hopkins University, respectively.

Finally, Timmy Chou and Chris Tew serve as vice presidents — Chou as Senior Vice President and CFO, Tew as Executive Vice President. Chou holds numerous leadership roles with Aureus Product Innovations, Forma Endoscopy, and Majelco Medical. He also brings extensive experience with startup management, particularly in the CFO role. Tew has served as a VP of worldwide sales for Protocol Systems and assisted the company through its eventual sale to Welch Allyn. 

Overall, the Phoenix team has thorough familiarity with its target markets and startup management in general. This is an extremely experienced and technically strong team, as reflected by the company’s impressive team score — it’s highest score across all five metrics.

Obviously, Phoenix’s biggest competitors are traditional opioid companies, which are numerous and highly competitive. In the smaller sphere of non-addictive painkillers, Phoenix faces less competition. German pharmaceutical company Grunenthal is one such competitor, which claims that its compound has reduced side effects, but like traditional opioids stimulates the Mu receptor exclusively. A more relevant competitor is Astraea Therapeutics, a California-based company in the preclinical stage for its compound, a potent and non-addictive pain reliever.

Phoenix sets itself apart from even these competitors with strong patent protection. Both of its most prominent compounds — PPL-103 and PPL-138 — are protected by composition of matter patents, which protect synthesis and use. Phoenix plans to use these patents to license its compounds out to major pharmaceuticals for manufacture, once human trials are complete. Given the largely empty field of direct competitors and the runaway success of the trials so far, Phoenix is well-positioned to dominate their chosen space. Thus, its differentiators score is quite strong.

Despite being in a pre-profit phase, Phoenix has demonstrated impressive revenue growth — from $66,654 in 2018 to $1,285,068 in 2019, which is very encouraging to see in a startup at this stage. On a more technical level, the company’s clinical trials have been unexpectedly slowed in their rollout, and updates to investors have been sporadic. The good news is that peer-reviewed animal trials have shown significant improvements over competing compounds.

Phoenix has also seen success in the form of grants from the US Army Medical Research and Material Command ($2.7 million — a sizable but unsurprising amount considering the high risk and reality combat troops face of opioid addiction and overdose) and the National Institute for Drug Abuse ($185,000). Due to its growing revenue numbers and the early traction from grants, Phoenix PharmaLabs’ performance score is above average.

Investors should be careful to not be overconfident in Phoenix PharmaLabs’ products until human trials are complete. While animal trials are indeed promising, there’s a reason human trials are conducted so cautiously. Many products that seemed miraculous when tested on animals prove debilitating when tested on people. Proving that the company’s protected compounds actually work is a huge first step. The second is licensing and maneuvering for an eventual sale. Opioid manufacturers are likely to be incredibly protective of their market share, and we know they can be ruthless in their protective practices.

Phoenix PharmaLabs needs human trials to show the same amazing results as the animal trials have. And after that, the company will still need to secure FDA approval for its products. If neither of those events occur, it will not see success. Investing at this stage represents an optimistic risk.

The United States is absolutely desperate for a solution to the opioid addiction epidemic at this point. Overdose numbers are rising, and our ageing population is increasingly relying on painkillers to manage the tribulations of growing old. This multibillion dollar market is likely to be rocked with overwhelming consumer influence in the form of advocacy groups and government crisis management should Phoenix’s compound prove viable, and pharmaceuticals will be under a huge amount of pressure to snap it up.

Thanks to its patent protection of both its compounds and its lack of current competition, Phoenix is positioned to potentially deliver lucrative returns to investors. Quite simply, if it works, this drug could change everything about opioid use in the United States. Phoenix could see huge profits and have a massive societal impact, and investors could ride that wave along with it.

Phoenix PharmaLabs has been rated a Deal to Watch as a potential game-changer in the markets of opioid drugs, pain relief, and addiction treatment. Its patent-protected compounds, PPL-103 and PPL-138, target all three opioid receptors in the brain, as opposed to traditional opioids that target just one receptor with 10 times the intensity. By balancing and limiting this stimulation, the compounds eliminate the debilitating side effects of other opioids and produce a pain reduction effect 10 times more powerful than morphine.

The product has yet to be human-tested, and so these results are not fully confirmed. Should human trials see similar results, however, and should the compounds receive FDA approval, Phoenix intends to license them to pharmaceutical manufacturers before being eventually acquired by one of the industry giants.

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Analysis written by Benjamin Potts.