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A quick look at EMulate Therapeutics
EMulate Therapeutics, Inc. (EMTX) has filed proposed terms of an initial public offering of its $12.5 million common stock pursuant to an amended S-1/A registration statement.
The company develops medical device technologies for the treatment of various serious health conditions.
EMTX is barely capitalized so I’m waiting for the IPO.
EMulate Therapeutics overview
Based in Bellevue, Wash., EMulate was formed to develop its ulRFE low-to-ultra-low frequency radiofrequency energy device to “regulate signaling and metabolic pathways at the molecular and genetic levels—without chemicals, radiation, or drugs.”
Management is led by Chairman, CEO and President Chris E. Rivera, who has been with the company since 2014 and was previously Founder, CEO and President of Hyperion Therapeutics and Head of Commercial Operations at Genzyme Therapeutics, “where he built Genzyme’s US and ran renal commercial operations.”
The company says that its electromagnetic field technology “did produce essentially similar molecular effects as the paclitaxel drug at the cellular level.”
Below is a table from the company detailing the status of their device studies:
company status (SEC)
Management says it has “pivotal trials ready” for various treatment indications, but isn’t currently conducting trials, and it’s unclear to what extent Phase 1 or Phase 2 trials have been conducted and accepted by the US Food and Drug Administration.
The company operates through a number of subsidiaries depending on their specific healthcare focus.
EMulate has booked a fair market value investment of $19.2 million as of September 30, 2022 from investors including The Butters Family Revocable Trust and individuals.
EMulate Market and Competition
According to a 2021 market research report by Grand View Research, the Global Pulsed Electromagnetic Field Therapy Market [PEMF] Devices were estimated at $360 million in 2020 and are expected to reach $656 million by 2028.
This equates to a projected compound annual growth rate (CAGR) of 7.8% from 2021 to 2028.
Key elements driving this anticipated growth are improvements in PEMF device technologies, miniaturization, and increasing fractures and diseases associated with aging populations.
The following pie chart also shows the breakdown of PEMF devices by market use:
Global market for PEMF devices (Grand View Research)
Key competing vendors offering or developing related treatments include:
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Novocure
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Bedfont Scientific
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Orthofix Holdings
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Medical department of I-Tech
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CAN
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Medithera
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NiuDeSai
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Nuage Health
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Oxford Medical Instruments Health
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Bemer, LLC.
EMulate Therapeutics financial status
The company’s recent financial results are typical of a development-stage life sciences company with modest revenues and significant R&D and G&A expenses associated with its product development efforts.
Below are the Company’s financial results for the last two calendar years:
Operating Invoice (SEC)
As of September 30, 2022, the Company had $11,000 in cash and $27.2 million in total debt. (unaudited, preliminary)
EMulate’s IPO details
EMTX intends to sell 2.5 million common shares at a proposed mid-point price of $5.00 per share for gross proceeds of approximately $12.5 million, excluding the sale of customary underwriter options.
No existing or potential new shareholders have expressed an interest in purchasing shares at the IPO price.
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 $75.6 million.
The free float to outstanding share ratio (excluding underwriter options) will be approximately 16.3%. A number below 10% is generally considered a “low float” stock, which can experience significant price volatility.
According to the Company’s most recent regulatory filing, it plans to use the net proceeds as follows:
We intend to use the net proceeds from this offering primarily for general corporate purposes, including clinical trials, pre-clinical research and development, technology development, outstanding debt and working capital.
(Source – SEC)
Management’s presentation of the company’s roadshow is not available.
Regarding pending legal proceedings, management stated:
“Following an arbitration settlement reached in 2016 with two former employees and founders of the company regarding the severance payments to be made under their respective employment contracts, we are obliged to pay these people a severance payment. Payment of the full amount to date has been deferred due to a number of agreements and we remain in compliance with our scheduled payment obligations under those deferral agreements. The total unpaid severance payment as of December 31, 2022 is approximately million. We are in discussions with the former employees and founders. The final outcome of this matter is not foreseeable at this time.” (Source – SEC.)
The sole public bookrunner of the IPO is EF Hutton.
Comment on EMulate Therapeutics
EMTX is seeking capital from the US public market to fund its continued product development and corporate plans.
The company’s lead candidate has “brought about essentially similar molecular effects as the paclitaxel drug at the cellular level,” although management is not currently in trials and it’s unclear what approvals the company has received from the FDA for experimental use.
The market opportunity for PEMF treatment options for various indications is potentially large but difficult to quantify in terms of applicability to the company’s treatment approach.
Management has not disclosed any collaborative relationships between major pharmaceutical or medical device companies.
The Company’s syndicate of investors does not include any well-known institutional life science venture capital firms or strategic medical device investors.
EF Hutton is the lead underwriter and the IPOs the firm has managed over the last 12 months have generated an average negative return (67.2%) since going public. This is a lowest performance for any major underwriter during the period.
As for the valuation, EMulate Therapeutics, Inc. management is asking investors to pay an enterprise value of approximately $75.6 million in the IPO, well below the typical range for an established, institutional, venture-backed biopharmaceutical company .
Management’s strategy is to seek approvals for treatments across a broad range of diseases, which is why the Company has established subsidiaries in certain areas to better facilitate partnering and financing options.
I prefer a more focused approach as it is difficult and time consuming enough to get one device approved for one indication and successfully commercialized, let alone ten of them.
Also, the IPO stock price of “$5.00” is typical of many current IPO candidates with small capitalization, so EMulate Therapeutics, Inc.’s IPO is likely to be aimed more at individual investors than institutional investors.
My prospects for the IPO have been put on hold.
Estimated IPO Price Date: To be announced
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