Medicortex plans to list on First North

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Kauppalehti reported on June 10, 2022:

The biotechnology company Medicortex plans an initial public offering (IPO) and seeks to list its shares on the First North list of the Helsinki Stock Exchange.

The company was founded in 2014 and specializes in developing diagnostics for brain injuries. The company’s founder is Adrian Harel, and it is located in Turku.

Medicortex aims to develop solutions for the constantly growing problem of inadequate diagnostics for traumatic brain injury, especially its mild form, i.e., concussion.

The company is developing a single-use portable diagnostic test that can detect biomarkers of brain injury from, for example, urine and saliva. According to the company, current methods for determining mild traumatic brain injury are insufficient, require many resources, and are prone to human error.

The company has conducted three studies in which samples were collected from patients with brain injuries and compared with samples collected from healthy controls to identify new brain injury biomarkers. The latest clinical study focused on children and adolescents.

According to the company, the goal of the IPO is to advance financial opportunities for product development, expand the ownership base, offer owners the opportunity to trade the company’s shares, and improve the usability of shares as a means of payment in possible strategic acquisitions.

The company aims to raise gross proceeds of approximately three million euros. The funds received from the offering are intended to be used primarily for the company’s product development and strategy implementation.

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So, a solution like this is being sought for pharmacy shelves. What thoughts does this new listing evoke in forum members? More information here: https://www.nordnet.fi/fi/kampanjat/listautumisannit/medicortex/medicortex-listautumisanti

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As usual, I wrote an IPO analysis on Medicortex. The IPO is quite unusual, as it is clearly the highest-risk IPO I have ever seen. If the IPO were to fail, there would be a genuine risk of the company’s business effectively ending already this year! Medicortex listautumisanti-analyysi - Omavaraisuushaaste

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I’ve been following the company’s operations and progress for several years now, ever since the Invesdor offering (2017). Practically, at least according to the company’s website announcements, it has been possible to invest in the company multiple times in between.

The valuation has steadily increased over the years, and last summer I was even offered participation in an offering at a price of €6.4 (corrected for split: €0.64). At that time, I tried to ascertain from the company what the fully-diluted value of the company might be, as I vaguely recalled an earlier directed offering to owners where for each subscribed share, one received option rights entitling to subscribe for new shares at a nominal price. At that time, the company refused to comment on the number of options, which was quite a turn-off for me, and I stopped considering investing.

If I interpret the terms of the current offering correctly, I believe the company’s valuation after listing is indeed higher than the €9.89M mentioned by @Omavaraisuushaaste? The listing prospectus states the following: As of the date of this Prospectus, the Company has 19,135,830 fully paid shares (and 616,512 options, which entitle to subscribe for 6,165,120 new shares), in addition to which the Company offers for subscription initially a maximum of 6,000,000 new shares of the Company (“IPO Shares”).

Doesn’t this result in a share count of 19,135,830 + 6,000,000 = 25,135,830 shares and a company value with the offering valuation of €0.5/share of approximately €12.57M? And to get the fully-diluted value from this, an additional 6,162,120 shares are added, totaling €15.65M (If I remember correctly, the exercise price of the options was practically nominal, and these will not significantly fill the company’s cash reserves. If anyone has other information, please correct me)?

Of course, it’s entirely possible that I’ve misunderstood something or am looking at the wrong figures. But if so, please tell me where I’m going wrong so I can calculate correctly next time :smiley:

There’s still huge potential here, but as mentioned in the analysis above, a major risk is the sufficiency of funds until break-even, or even any cash flow. As someone working in drug development, I have yet to see a single project where schedule forecasts were met; unfortunately, things usually go in the completely opposite direction with schedules…

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Yeah, actually, I didn’t include those options in my calculations, so you’re absolutely right! I’ll update it. For some reason, I read from the prospectus that there were currently about 12 million shares—I guess I shouldn’t be staring at lines too late at night :smiley:

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Indeed, this IPO is about securing the company’s existence, and after the (one share gets you nine free shares) split, previous funders want to sell. Shares received for free, even at a price of 0.25, are pure profit.

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As I recall, BBS was also pretty much between a rock and a hard place regarding funding when it was listed on the stock exchange.

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“The body that approved the project and potentially grants funding is the U.S. Army Medical Research and Development Command (USAMRDC). According to the company’s estimate, the funding preparation phase will last a few months.”

https://www.inderes.fi/fi/tiedotteet/medicortex-finland-oyj-neuvottelee-jopa-2-miljoonan-dollarin-tutkimusrahoituksesta

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Interesting company. This is truly a double or nothing bet, as there’s no information currently on whether it will succeed or not. @Omavaraisuushaaste wrote a good summary of the case. Valuation is modest and risks are very high. As a plus, compared to many other medical ventures, I could say that the chances for rapid adoption are exceptionally good because there’s nothing similar in use right now, and brain injury diagnostics are a problematic chapter at the moment. There’s plenty of news coverage, for example, about disputes with insurance companies in this context.

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This whole endeavor seems to be on very shaky ground. The scientific evidence is non-existent, and the conclusions are far-fetched. It will surely not receive marketing authorization and will not be approved for clinical use, at least not in Finland. This is activity that compromises patient safety. The company has run out of money multiple times, and now they seem to be trying to beg for more by listing themselves.

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But the US Department of Defense wants to fund it? Yes, that creates credibility for the case in my ears.

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I browsed the company’s website and came across the “Key Benefits of Medicortex Test” list, and now I’m going to challenge some of these points. I am a doctor but no longer treat trauma patients daily.

  • Reliable: Based on our pre-clinical trials, the reliability is very high. The increased accuracy can help diagnose even milder cases of TBI.

It would have been nice to see more data; “reliability is very high” sounds good, but no matter how hard I tried (on my phone) to find more detailed data, I only found additional information on clinicaltrials.gov without actual results. Also, there is no information on how low a biomarker level is considered positive. If I play football for 90 minutes and head the ball 10 times from a cross, will the test be positive?

  • Inexpensive: Since no trained staff or laboratory equipment is needed unlike other TBI detection methods, the tests are extremely low cost.

Medicortex’s product is binary: there is a brain injury or there isn’t, making interpretation simpler. A professional knows that someone suffering from “concussion” symptoms has almost certainly sustained at least a (very) mild brain injury. However, after an athlete takes a blow to the head, this could be a concrete way for a layperson to distinguish minor impacts from more significant ones. This is essentially unnecessary because if a layperson can be taught to use such a test, they can also be educated about the symptoms of mild brain injury.

  • Reduces unnecessary expensive CT/MRI scans: The current gold standard for the diagnosis of brain injury are imaging techniques that are expensive. Plus, most hospitals only have one or very few of those testing machines.

This is an interesting claim. I don’t believe there is any data yet to support a realistic possibility of skipping a CT or MRI based on a negative biomarker. Of course, radiation exposure to children and adolescents is to be avoided, but with mild symptoms, a positive biomarker is unlikely to lead to a CT scan if it wasn’t originally planned. Unless, of course, a high biomarker level test (compared to this mentioned mild TBI test) were to become available for clinical use?

  • Easy to interpret: the results are as simple to interpret like a pregnancy test. Positive stands for the presence of TBI and negative for no brain injury.

This is a repetition of the earlier “no training” section.

  • Eliminate the “silent” from the epidemic: Ideally, Medicortex test can be used in routine checks at the general practitioners or when being admitted to the emergency room. That way, anyone with even mild TBI is aware about their condition.

“Routine check at the general practitioners” practically describes a completely unscalable population. In such a scenario, no test can be very good because the prevalence of the screened disease in the population is quite small, for example, the coronavirus antibody tests in early 2020, which were initially mostly false positives. What about a scaled population, e.g., a junior football team? Perhaps, but the studies conducted so far are not yet sufficient to provide information on the suitability of the test for this purpose.

Studies excluded patients with chronic diseases, alcoholics, diabetics, etc., even though testing intoxicated trauma patients, for example, is precisely what this is being considered for.

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More thoughts arose when I saw Nordnet’s advertisement about the IPO:

The company is developing a diagnostic test for detecting traumatic brain injury and drug molecules for its treatment.

Please let me know if you’ve found information about this somewhere, but I couldn’t find a single word anywhere suggesting that the company has done anything regarding the development of that drug molecule? Since 2020, the company’s press releases have mentioned “drug treatment,” but I couldn’t find any substance to this? My understanding of the company’s next steps would change significantly if some drug molecules were still in development.

Edit: I received an answer from the CEO stating that I should look at the patent page, where the patents can be found. I checked Espacenet, but my skills end there.

  1. Multivalent compounds for use in the treatment and prevention of brain damage
    US patent No. 9,975,846
    Finnish patent No. 127024
    Israeli patent No. 251407
    European patent No. 3201173

  2. Conjugates and conjugates for use in preventing or treating brain damage and neurodegenerative diseases
    PCT application WO 2021/038125

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Medicortex’s Board of Directors decided to cancel the IPO because the IPO did not achieve a satisfactory number of share subscriptions for the Company.

https://www.inderes.fi/fi/tiedotteet/medicortex-finland-oyj-peruuttaa-listautumisantinsa-ja-listautumisensa

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“Edit: I got a response from the CEO saying to check the patent page, the patents are there.”

it could have been said in a more customer- or investor-friendly way,

I haven’t looked at the patent page, but they should be read and analyzed relative to competitors

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We’re forced to get by with very little information here. I don’t know if the company would have managed as a listed company, at least not with this level of communication. How much cash is in the bank, how long will it last… even basic figures are missing.
After the cancellation, they sought new funding and probably got some. This information is, of course, also missing. Now they are seeking more… Are they living hand to mouth here?
And even if everything were actually fine, how long will they manage with some US funding?
They should at least hold an information session where current shareholders are given information and answers to their questions.
Sometimes criticism isn’t a bad thing… Let’s hope this serves as a wake-up call.

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Okay, I’ll answer myself then :slight_smile: .

I have offered Medicortex help with a similar forum (also Discourse) so they can discuss with small investors. I have previously created closed areas for crowdfunding where I have been involved. This suggested one would also be closed, mainly because difficult questions might arise, and if publicly dissected, they could hinder offerings or fundraising. Used correctly, a discussion channel provides the company with both ideas and help in exchange for better communication.

If there are existing Medicortex small investors reading this thread who crave information as much as I do, please send me a private message here. We can even create a private message thread here for the most urgent needs…

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I’m puzzled… Not a peep from Medicortex. It would be nice to know how many participated in the quick offering in July… and in the current one (I don’t even know when it ends/ended, I guess it’s written somewhere).
No one contacted me privately here (from other threads, yes). So where are the many hundreds of Medicortex small investors lurking? If you Google it, this is almost one of the only threads where the company is mentioned at all (other than that it “was” going to list).

I guess I’ll have to ask Medicortex directly. The questions would have more weight if there were more people asking… and probably better questions too.

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That IPO was canceled because there wasn’t enough interest from the company’s perspective. The money of those who participated in the offering was refunded, and they did not become shareholders. That perhaps explains this silence, as it is difficult to trade shares of an unlisted company.

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Yes, but some of those interested still participated in the unofficial subscription in July (meaning the company probably asked everyone individually who wanted to participate in First North). Apparently, not enough money was raised from that either, so a new “call” came in August.
The whole thing is starting to sound like they’re just gathering “ten grand” a month from anyone just to pay for the current trial.
If one knew that the company could manage with the current money until the end of the year, it would be much more relaxed. Building a small buffer in case US funding is delayed would just be good management.
But if US funding depends on successfully completing the trials with a certain percentage… that’s scary (meaning that they run out of money midway and don’t get the millions).

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The company has had a continuous share issue almost since the Invesdor funding round, and sometimes new shares have come with “free” options at a nominal price. I think I mentioned earlier that when I was asked if I wanted to participate in the pre-IPO offering, I tried to ask the company how many options they had outstanding and what the fully diluted value of the company was. They didn’t want to comment on the matter, so after that, I’ve no longer been interested in investing in the company at all… And these non-comments haven’t really changed that perception…

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