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A brief overview of Origin Life Sciences, Inc.
Origin Life Sciences, Inc. (OLSI) has filed to raise $15 million in an initial public offering of its common stock, according to an S-1 registration statement.
The company is Development of a medical device to treat various infections and regenerate tissue.
Given the long time horizon to potential medical device approvals, high valuation expectations and other associated risks, I will oppose Origin Life Sciences, Inc.’s IPO.
Origin overview
Based in Princeton, New Jersey, Origin Life Sciences, Inc. was formed to develop its high-energy plasma device that delivers nitric oxide to targeted areas of the body.
Management is led by Founder, Chairman and CEO Michael Preston, who has been with the firm since its inception in 2010 and was previously at Price, Waterhouse, London, and a Fellow of the Institute of Chartered Accountants of England and Wales.
The device is called “Ionojet” and is in studies for the potential treatment of diabetic foot ulcers.
Specifically, management plans to submit its PMA application to the US FDA in Q2 2024, and device approval may be obtained within six to fifteen months, or possibly not at all.
As of December 31, 2022, Origin has received support from investors including Square Table LLC, Isaac Anthony and Alexander Dolgopolsky, Ph.D.
Origin Market and Competition
According to a 2022 market research report by Grand View Research, the global diabetic foot ulcer treatment market was estimated at US$4.7 billion in 2021 and is projected to reach US$7.9 billion by 2030.
This equates to a projected CAGR of 5.9% from 2022 to 2030.
The main causes of this expected growth are an increased risk of obesity, poor blood sugar control and other lifestyle issues that are likely to increase the incidence of diabetic foot ulcers.
The chart below also depicts the global Diabetic Foot Ulcer Treatment market share by ulcer type:
Global Diabetic Foot Ulcer Treatment Market (Search by Alpha)
The North America region accounted for the largest market share, while the Asia-Pacific region is expected to see the highest growth rate at 7.4% CAGR through 2030.
Key contestants or other industry participants include:
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SaNOtize Research and Development Corp.
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Edixomed Ltd.
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Other big pharmaceutical companies worldwide.
Origin Life Sciences, Inc. Financial Performance
The following are relevant financial results arising from the company’s registration statement:
Operating Invoice (Search for Alpha)
As of December 31, 2022, Origin had $554,379 in cash and $18.6 million in total debt.
Origin Life Sciences, Inc. IPO Details
Origin intends to raise US$15 million in gross proceeds from an initial public offering of its common stock and is offering three million shares at a proposed mid-price of US$5.00 per share.
In addition, the Company is registering the resale of 775,900 shares by selling shareholders.
No existing shareholder has expressed an interest in purchasing shares at the IPO price.
Assuming a successful IPO, the Company’s enterprise value at IPO would be approximately $182.6 million excluding the impact of underwriters’ over-allotment options.
The free float to outstanding share ratio (excluding over-allotments by underwriters) will be approximately 7.72%. A number below 10% is generally considered a “low float” stock, which can experience significant price volatility.
Management says it will use the net proceeds from the IPO as follows:
to fund our ongoing clinical program for Ionojet, including [an undisclosed amount] used specifically to complete the revised design of the Ionojet technology and submit a new IDE for our pivotal diabetic foot ulcer study;
$1,649,452 for the redemption of all outstanding shares of Series B Preferred Stock, inclusive of accumulated dividends at a single annual rate of 20% per annum based on the stated value of $100 per share, calculated through March 31, 2023, which amount will be may be increased by a bonus payment of up to US$1 million under the terms of an agreement with the holder of the Series B Preferred Stock if net proceeds from the IPO exceed US$15 million;
$386,883 in full payment of the amount owing under the LFEIF debenture, including interest at a fixed simple rate of 20% per annum, calculated through March 31, 2023, the debenture becoming due thirty (30) days after the closing of this offering;
approximately $160,000 in loan repayments, of which $135,000 will be repaid to related parties ($50,000 to Michael Preston, our Chairman and Chief Executive Officer; $30,000 to David Dantzker, our Vice Chairman and Chief Medical Officer; $42,000 to John Fernandes , our Chief Financial Officer and $13,000 to Alexander Dolgopolsky, a holder of more than 5% of our outstanding common stock and our former Chief Scientist);
approximately $725,000 in deferred compensation over the 18 months following this offer, of which $250,000 will be paid to John Fernandes, our Chief Financial Officer; And
the remainder for working capital, research and development, general and administrative affairs and general corporate purposes.
(Source – SEC.)
Management’s presentation of the company’s roadshow is not available.
Regarding pending lawsuits, the company has filed a lawsuit against Magid Financial Services for breach of contract as Magid failed to purchase stock in the company for approximately $7.25 million.
The sole public bookrunner for the IPO is Boustead Securities.
Commentary on Origin’s IPO
OLSI is seeking funding from the US public capital market to put its medical device through the testing process.
The company plans to submit its PMA application to the U.S. FDA in Q2 2024 and device approval can potentially be obtained within six to fifteen months, provided it is proven to be sufficiently safe and effective.
The company currently plans to pay Series B preferred shareholders a 20% annual rate, “payable in cash upon redemption of those shares.” The company has no plans to pay any more dividends and reinvest available earnings into its growth and working capital needs.
The market opportunity for the treatment of diabetic foot ulcers is large and is expected to grow at a moderate growth rate until 2030.
Boustead Securities is the lead underwriter and IPOs led by the firm over the past 12 months have generated an average negative return (73.6%) since going public. This is a lowest performance for any major underwriter over the period.
Risks to the company’s prospects as a public company include its thin capitalization, heavy debt burden, and regulatory risks.
As for valuation expectations, management is asking investors to pay an enterprise value of approximately $183 million despite it being in very early stages of development and several years away from potential market approval.
Given the long time horizon to potential medical device approvals, high valuation expectations and other associated risks, I will oppose Origin Life Sciences, Inc.’s IPO.
Estimated IPO Price Date: To be announced.
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