Phoenix PharmaLabs

Growth Stage

Addressing the opioid crisis by developing potent, safe, non-addictive painkillers.

Analytics

Raised to Date: Raised: $1,065,500

Aggregate Commitments $

Platform

Netcapital

Start Date

01/31/2021

Close Date

06/18/2021

Min. Goal

$10,000

Max. Goal

$1,070,000

Min. Investment

$99

Security Type

Equity - Common

Funding Type

RegCF

Series

Seed

Pre-Money Valuation

$26,790,283

Rolling Commitments $

Status
Funded
Reporting Date

08/11/2021

Days Remaining
Funded
% of Min. Goal

10,655%

% of Max. Goal

100%

Likelihood of Max
Funded
Avg. Daily Raise

$7,721

Momentum
Funded
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Location

Woods Cross, Utah

Industry

Healthcare & Pharmaceuticals

Tech Sector

HealthTech

Distribution Model

B2B2C

Margin

High

Capital Intensity

High

Business Type

Growth

Phoenix PharmaLabs, with a post-money valuation of $26,790,283, is Crowdfunding on NetCapital. The company is a preclinical drug discovery company dedicated to the development of potent, safe, non-addictive treatments for pain and addiction. John Lawson, PH.D. and Lawrence Toll, PH.D. founded Phoenix PharmaLabs. The crowdfunding round has a minimum raise of $10,000 and a maximum raise of $1,070,000. Phoenix PharmaLabs lead drug, PPL-103, has demonstrated in animal studies that it is a very potent painkiller (10x more potent than morphine), and is non-addictive, does not produce withdrawal, does not cause death from overdose at elevated doses, and causes no constipation.

Summary Profit and Loss Statement

Most Recent Year Prior Year

Revenue

$1,285,068

$66,654

COGS

$0

$0

Tax

$0

$100

 

 

Net Income

$-552,876

$-939,817

Summary Balance Sheet

Most Recent Year Prior Year

Cash

$761,206

$37,344

Accounts Receivable

$0

$0

Total Assets

$761,206

$37,344

Short-Term Debt

$0

$1,964,449

Long-Term Debt

$2,058,665

$0

Total Liabilities

$2,058,665

$1,964,449

Financials as of: 01/31/2021
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Raise History

Offering Name Close Date Platform Valuation/Cap Total Raised Security Type Status Reg Type
Phoenix PharmaLabs 06/18/2021 Netcapital $26,790,283 $1,065,500 Equity - Common Funded RegCF
Phoenix PharmaLabs 01/30/2021 Netcapital $26,790,283 $0 Equity - Common Funded Test the Waters
Phoenix PharmaLabs 03/30/2019 Netcapital $23,136,335 $1,102,553 Equity - Common Funded RegCF
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Ratings

Analyst Report

Synopsis

In the years before the world’s current COVID-19 crisis, America in particular faced a deadly and persistent threat of its own making: opioid addiction. Despite a surge in attention over the past several years, legislative efforts to combat the crisis, and President Trump’s emergency declaration of 2017, the problem has only gotten worse. The Centers for Disease Control and Prevention reported that over 81,000 drug overdose deaths were recorded over the 12-month period ending in May of 2020, the highest number of overdose deaths ever in that period. Synthetic opioids (mostly illicitly manufactured fentanyl) were the highest driver of this increase, alongside cocaine.

The origins and causes of the crisis are disturbing and highly fraught, dating back to the 1990s when pharmaceutical companies dismissed concerns that opioids might be addictive and encouraged doctors to prescribe them at high rates. Since that time, through no fault of their own, all manner of patients have come to biologically depend on opioids. In 2018, 10.3 million people aged 12 or older misused opioids in the U.S. Such high numbers are understandable considering how pervasive opioids are as a medical treatment. One in three Medicaid Part D beneficiaries received a prescription opioid in 2016. Two-thirds of all drug overdoses involve opioid use.

Opioids — which can range from illicit drugs like heroin to prescribed painkillers like morphine and codeine — function as painkillers by stimulating the Mu region of the brain to generate relief. The euphoria generated by these drugs is what leads to the addiction. Back for a second round as a KingsCrowd deal, Phoenix PharmaLabs Incorporated has a better way to manage pain which completely avoids the euphoric dangers of traditional opioids. Their main opioid compound, PPL-103, activates all three receptors — the Mu, the Delta, and the Kappa — to individually lesser degrees, leading to increased pain relief and none of the debilitating and addictive side effects.

The product is preclinical, but peer-reviewed animal studies have been incredibly promising. Results have demonstrated pain relief up to ten times that of morphine. The drug is non-addictive, has no withdrawal symptoms, cannot cause death from overdose, and as an added bonus, does not produce the constipation induced by traditional opioids. PPL-103 is being advanced as a solution for acute pain, while a similarly-functioning compound acquired by Phoenix from the University of Bath called PPL-138 is being advanced to treat chronic pain.

Phoenix PharmaLabs’s current Netcapital raise has been rated a Deal to Watch by the KingsCrowd investment team.

Price

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.

Market

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.

Team

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.

Differentiators

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.

Performance

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.

Bearish Outlook

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.

Bullish Outlook

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.

Executive Summary

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.

For questions regarding the KingsCrowd staff pick or ratings for this company, please reach out to support@kingscrowd.com.

Analysis written by Benjamin Potts.

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Phoenix PharmaLabs on Netcapital
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Platform: Netcapital
Security Type: Equity - Common
Valuation: $26,790,283
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