SINGAPORE (Dec 18): Catalist-listed iX Biopharma has launched a line of nutraceuticals that could help it turn a profit sooner than it could have done through the development of its pain management, erectile dysfunction and opioid treatment drugs. The products could also improve market sentiment toward its stock price, which hit an all-time low of 18.4 cents two months ago and is more than 50% off its IPO price two years ago.
Nutraceuticals — the compound term describing dietary supplements and fortified food products — are a fast-growing market estimated to hit US$285 billion ($384 billion) globally by 2021, growing 7.5% annually from 2016. Meanwhile, iX Biopharma has spent the last few years developing a non-opioid painkiller and patenting a sublingual wafer drug delivery system, WaferiX, which promises optimal delivery of drugs into the bloodstream and therefore a faster effect. The company’s key product, Wafermine, or ketamine in a sublingual wafer formulation, has the potential to be a star, in the face of a major backlash against opioids, particularly in the US.
Still, as is to be expected in drug development, progress has been laborious. And, market sentiment towards the company’s stock has been correspondingly poor. Yet, chairman and CEO Eddy Lee is upbeat. “To be fair to the company, the milestones we’ve achieved in drug development have always been positive,” he tells The Edge Singapore. “Shareholders may have felt it has been taking forever, but we never said it would be short.”
Now, he is anticipating that the nutraceuticals, bearing the catchy suffix “-iX”, could help generate a profit by FY2019 for iX Biopharma, which has yet to turn an annual profit. The products have been much quicker to develop and produce, and have had to go through much fewer regulatory processes than pharmaceuticals. “Hopefully, this nutraceuticals business will drive earnings growth sooner than later and appease [shareholders].”
How will the new entity drive growth at iX Biopharma? Is this an opportunity for investors now?
Burgeoning market
The line of 11 products is carried under Entity Health, a wholly-owned subsidiary that iX Biopharma set up for the new business. They have been developed over the course of a little over a year, and Lee asserts that this has been done with minimal cost to shareholders. For one, the supplements are developed and produced with iX Biopharma’s existing assets — the scientists and doctors and the manufacturing facility in Victoria, Australia. The products are available in Singapore through online sales only, and the company is keen to make it available to the rest of Asia early next year.
According to the company, the products are not regular Vitamin C or calcium supplements, but address specific conditions — from bone and joint health to improvements in energy and memory, and skin radiance.
Lee says these nutraceuticals are formulated by the company’s team of scientists and doctors, using ingredients such as glutathione and nicotinamide to work on various conditions.
Still, the nutraceuticals were not quite designed to bridge the gap in earnings. The way Lee puts it, iX Biopharma had effectively stumbled on the new business. “It’s actually quite opportunistic,” he says. “We noticed there was a huge trend towards people demanding better products than day-to-day supplements. They want condition-based [products], and we have this group of people working for us who know about developing condition-specific [pharmaceuticals]. So, we evolved from that.” Importantly, Lee believes the launch of the new business has been timely. “The market actually wants it.”
Perhaps in an indication of this trend, on Dec 5, the world’s biggest food company, Nestlé, said it would spend US$2.3 billion to buy Atrium Innovations, a maker of multivitamins, probiotics and meal replacements.
According to projections by various industry analysts, the global market for nutritional supple-ments has been growing. Ths is not least because demand from China, whose growing affluent and educated population is on the lookout for higher-quality nutrition and healthcare.
The Chinese market for nutraceuticals is been forecast to be worth RMB180 billion ($36.7 billion) by 2020, up from RMB120 billion in 2015, and could soon overtake the US as the largest market. Blackmores, the Australian supplement brand, recorded A$132 million worth of sales in China in its FY2017, up 71% from the year before. Last year, Best World International, which sells weight management and beauty products, recorded $58 million worth of sales in Hangzhou alone. For the first six months of this year, the company recorded $48 million worth of sales in the city.
To be sure, China has recently tightened regulations regarding how foreign products are imported and sold in the country, including to customers who order online. Nevertheless, Lee is confident that the Entity products will be a hit. “Given the demand for what I call basic dietary supplements, I’m quite confident we’ll make demand quite easily,” he says. “The market wants it and e-commerce allows us to transport it across borders.”
In a way, nutraceuticals and its availability via e-commerce seems to be a winning combination that is taking iX Biopharma out of the tedium of pharmaceutical development and processes. For one, access to consumers is far more immediate than pharmaceuticals and their limita-tions through medical prescriptions. In fact, it has emerged that Amazon.com, which has upended first the bookstores, other retailers and most recently supermarkets, is now looking to enter the pharmacy space, although it is unclear whether it only means to take on the incumbent distributors. The e-commerce giant is reportedly in exploratory talks with generic drug makers, including Mylan and Sandoz, a unit of Novartis.
Lee is still treading lightly on the new venture. For now, the products can be bought only through the company’s website, and there has been limited advertising. “It’s all about customer experience. We know our drug works, we know it gives you perceptible results, but on the other hand, if it’s too difficult to get a hold of, it won’t be good,” he explains. “We want to make sure the IT system, the fulfilments process is properly running.”
Offering options
Lee is not abandoning the pharmaceutical part of the business. PheoniX, a drug to treat erectile dysfunction in the form of the company’s patented sublingual wafer technology, is set to hit the shelves after registering with the Therapeutic Goods Administration in Australia. Once TGA’s approval is received, iX Biopharma can start registering PheoniX with other regulators in the region, without further study.
Wafermine is undergoing Phase 2 multidose-efficacy clinical trials in the US, one of the most challenging periods in a drug’s lifecycle. The company has also gone through the early stages of development of the drug Bnox, a sublingual wafer of buprenorphine that can be used to treat opioid addiction.
Meanwhile, WaferiX, which the company touts as an alternative to intravenous drug delivery and its limitations, has the potential to be applied to other drugs as well. Lee reckons there are at least a couple more pain management drugs that could be developed using this technology. Theoretically, such development — with existing drugs but a different delivery system — is cheaper and faster than producing an entirely new drug, such as for the treatment of Alzheimer’s. Significantly, iX Biopharma could make money off its drugs sooner than seeing them through the final phases of development and commercialisation, which could still take years.
“It’s a matter of outlicensing, which means when your development gets to a certain stage to pick a partner and more or less ask them to pay for the cost of [the rest of the development process],” Lee says. For Wafermine, for instance, “if the results [from the efficacy study] are good, the time is right now to partner someone to conduct the Phase 3 study. This efficacy study is the most important for us. We get past this, we get it right, we can then secure a partner and move on.” Where BnoX is concerned, however, finding a partner company could be much sooner and easier, given its application as part of therapy for opioid addiction, which has reached epidemic proportions in the US.
For FY2017 ended June, iX Biopharma spent $4.8 million on R&D, $3.6 million in operating expenditure and $1.1 million in capital expenditure. It also received about $4.1 million in cash rebates for R&D expenses. The company reported losses of $7.4 million on the back of revenue of $6.4 million, an improvement of 4% and 10% y-o-y, respectively.
For 1QFY2018 ended September, iX Biopharma recorded losses of $3.2 million, substantially more than in the same period the year before, owing to much higher R&D, and sales and marketing expenses. At current levels, the stock is trading at four times its net asset value of 5.1 cents. The company has a market capitalisation of $129 million.
Lee, who owns 27.83% of iX Biopharma, does not see why other shareholders should be unsure of the company’s future. He highlights that the company has some $30 million in cash on its balance sheet, enough to tide it through the next three years of drug development at the very least.
“It’s not that we don’t have a pipeline [of drug development],” Lee says. “Once we’ve succeeded with Wafermine, then it’s easier to ask for funding for the others.” Does that mean tapping shareholders for funds in the near future? “Frankly speaking, with a bit of luck with [the nutraceuticals business], we don’t think we’d ever have to go back to the market [for funds]. This business that we’ve evolved is actually bigger than when I considered [doing an IPO].”
