IPO Update: Cortigent Prepares $15M Mini-IPO (Pending: CRGT)

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A brief overview of Cortigent, Inc.

Cortigent, Inc. (CRGT) has filed a request to raise $15 million in an initial public offering of its common stock, according to an S-1 registration statement.

The company is developing a medical Device used to treat severe blindness and possibly other conditions.

Given the company’s small size, small capitalization, uncertain prospects for post-IPO success, and significant risks, my guidance on Cortigent’s IPO is sell.

Cortigent overview

Cortigent, Inc., based in Valencia, California, was formed to develop an implantable neurostimulation device to help patients with various forms of blindness regain their cognitive processing abilities through specialized training.

Management is led by Chief Executive Officer Jonathan Adams, who has been with the company since November 2022 and was previously the founder and CEO of BioVie was an associate director at Searle Pharmaceuticals.

The company’s first system, dubbed the Argus II, was approved under the US FDA’s Humanitarian Device Exemption program years ago and implanted in hundreds of completely blind people.

The company is developing “a more advanced artificial vision system” that it calls Orion.

Cortigent has booked a market value investment of $1.251 million as of March 31, 2023 from investors including parent company Vivani Medical, Inc.

Cortigent’s Market and Competition

According to a 2021 market research report by Coherent Market Insights, the global vision impairment treatment market was estimated at US$4.4 billion in 2020 and is projected to reach US$7.6 billion by 2027.

This equates to a projected CAGR (Compound Annual Growth Rate) of 8.1% from 2020 to 2027.

Key factors behind this expected growth are the increasing prevalence of eye diseases and vision loss, due in part to an aging world population.

The World Glaucoma Association also estimates that the number of glaucoma patients will increase from 79.6 million in 2020 to 111.8 million in 2040.

Key competing vendors offering or developing related treatments include the following:

• Pixium Vision SA

• Nano Retina Inc.

• Bionic vision technologies

• Illinois Institute of Technology

• microtransponder

• Other.

Cortigent financial status

Cortigent’s recent financial results are typical of a development-stage life sciences company, showing no revenue and significant R&D and G&A costs related to product development and regulatory activities.

The following are the Company’s financial results for the three months ended March 31, 2023 and 2022:

Operating Invoice (SEC)

As of March 31, 2023, the Company had $821,000 in cash and $4.3 million in total debt. (unaudited, preliminary)

Cortigent IPO details

Cortigent intends to sell 1.5 million common shares at a proposed mid-point price of $10.00 per share for gross proceeds of approximately $15.0 million, excluding the sale of customary underwriter options.

No existing or potential new shareholder has shown any interest in buying shares at the IPO price.

Immediately after the IPO, the company continues to be controlled by the parent company, Vivani Medical.

Assuming a successful IPO in the middle of the proposed price range, the Company’s enterprise value at IPO (excluding underwriter options) would be approximately $53.5 million.

The float to outstanding share ratio (excluding underwriter options) will be approximately 23.08%. Anything below 10% is generally considered a “low float” stock, which can experience significant price volatility.

The company is an “emerging growth company” within the meaning of the JOBS Act 2012 and has chosen to benefit from the reduced reporting requirements of public companies; Potential shareholders will receive less information for the IPO and going forward as a publicly traded company under the requirements of the law.

Pursuant to the Company’s most recent regulatory filing, the plan is to use the net proceeds as follows:

$2.5 million to repay amounts owed to Vivani for funds provided under the Transition Funding, Support and Services Agreement,

$2 million to manufacture and assemble new devices for use in Orion and stroke recovery systems,

$1 million for a planned pivotal study on Orion,

$2 million for other research and development, including the Stroke Recovery System, and

the balance of proceeds for general working capital.

We plan to use these proceeds over a period of approximately 18 months after receipt of proceeds from this offering. We anticipate that we will use the proceeds of the offering to fund the manufacture of devices to be used in clinical trials of Orion and the Stroke Recovery System in order to seek FDA approval to conduct these trials to select and qualify our sites for clinical trials and other trial preparation activities. We also anticipate conducting pricing and reimbursement market research for the Orion and Stroke Recovery Systems and completing our Orion Patient Preference Information (PPI) study, which will help us work with the FDA to determine our safety endpoints to determine. After that, we need additional funding to complete the pivotal Orion clinical trial and the first stroke device study. Determining the cost of the pivotal Orion study depends on factors such as the size of the study, its duration, site selection and site training, the writing and establishment of FDA-acceptable protocols, accepted safety endpoints, and other terms that we determine to establish jointly with the FDA .

(Source – SEC.)

A presentation of the company roadshow by the management is not available.

As for pending court cases stemming from opposition claims by competitor Pixium, the company’s two European patents have been invalidated but one patent has been reaffirmed, although this case is subject to appeal.

The only listed bookrunner of the IPO is ThinkEquity.

Commentary on Cortigent

CRGT is seeking public capital market investment in the US to fund further development of its next generation Orion system and to pay amounts due to parent company Vivani Medical.

The company’s flagship product is a second-generation system, after the company’s first product was implanted in several hundred patients.

Cortigent is now planning a pivotal study because initial proof-of-concept results from six patients resulted in five patients who “achieved significantly better results in square localization and direction of movement, and two out of five experienced a measurable improvement in visual acuity.”

The market opportunities for the provision of assistive devices for the visually impaired are large and are expected to grow at a moderate rate in the coming years.

According to a report commissioned by the company and prepared by Fletcher Spaght, management estimates the size of its US market at approximately 82,000 profoundly blind people, valued at approximately $4 billion.

The company has not announced any significant collaborative relationship with any medical device company.

ThinkEquity is the sole underwriter and the three IPOs it has completed in the past 12 months have generated an average negative return (37.0%) since their IPO. This is a bottom performance for any major underwriter over the period.

Risks to the Company’s prospects as a public company include the regulatory risks associated with the testing processes for its technologies and the costs associated with testing and commercialization.

As for valuation expectations, management is asking IPO investors to pay an enterprise value of $53.5 million at the IPO, which is below the typical range for a life sciences company.

Unfortunately, the medical device segment has performed quite poorly overall in recent years after the IPO.

Given the company’s small size, small capitalization, uncertain prospects for post-IPO success, and significant risks, my guidance on Cortigent’s IPO is sell.

Estimated IPO Price Date: To be announced.