MDNA Life Sciences Starts IPO Rollout

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A Quick Take On MDNA Life Sciences

MDNA Life Sciences Inc. (MDLS) has filed to raise $24.6 million in an IPO of its units of common stock and one warrant, according to an S-1 registration statement.

The firm is developing liquid biopsy tests for early detection of serious diseases.

When we learn management’s pricing and valuation expectations in a following filing, I’ll provide a final opinion.

MDNA Overview

West Palm Beach, Florida-based MDNA was founded to develop a family of biomarker identification diagnostic tests for detection of cancers and other diseases.

Management is headed by Chief Executive Officer Christopher C. Mitton, who has been with the firm since January 2016 and was previously head of sales operations for Cancer Genetics and led the N. America commercial operations expansion for Ipsogen.

The company’s primary development pipeline is shown here:

Company Pipeline

Company Pipeline (SEC – EDGAR)

MDNA has booked fair market value investment of $27.7 million as of September 30, 2021.

MDNA – Customer Acquisition

The company is still in development for its primary technologies, which have proceeded in trials in Europe.

The revenue generated so far has been related to COVID-19 diagnostic testing services and management expects such revenue ‘to taper off and ultimately cease by the end of the second quarter of 2022.’

The firm expects “revenues from our Mitomic tests to commence in the fourth quarter of 2022.”

General & Administrative expenses as a percentage of total revenue have dropped as its COVID-19 test-related revenues have increased, as the figures below indicate:

General & Administrative

Expenses vs. Revenue

Period

Percentage

FYE September 30, 2021

57.9%

FYE September 30, 2020

1572.2%

(Source – SEC)

The General & Administrative efficiency multiple, defined as how many dollars of additional new revenue are generated by each dollar of General & Administrative spend, was 1.7x in the most recent reporting period. (Source – SEC)

MDNA’s Market & Competition

According to a 2020 market research report by Grand View Research, the global market for prostate cancer diagnostics was an estimated $2.8 billion in 2019 and is forecast to reach $7.6 billion by 2027.

This represents a forecast CAGR of 13.2% from 2020 to 2027.

The main drivers for this expected growth are an increasing prevalence of prostate cancer among an aging global population and a growing awareness of related symptoms.

There are three primary test types used for diagnosing prostate cancer, with their respective market shares shown in the chart below:

Global Prostate Cancer Market by Test Type

Global Prostate Cancer Market by Test Type (Grand View Research)

Also, the chart below shows the historical and projected future growth trajectory of the U.S. prostate cancer diagnostics market size:

U.S. Prostate Cancer Diagnostics Market

U.S. Prostate Cancer Diagnostics Market (Grand View Research)

MDNA is also developing biomarker tests for other markets, including endometriosis, ovarian cancer and lung cancer.

Major competitive or other industry participants include:

  • MDx Health

  • Myriad Genetics

  • Abbott Laboratories

  • F. Hoffman-La Roche AG

  • Siemens Healthineers AG

  • OPKO Health

  • Genomic Health

MDNA Life Sciences Financial Performance

The company’s recent financial results can be summarized as follows:

  • Increasing topline revenue

  • Growing gross profit and gross margin

  • Decreased operating loss

  • Reduced cash used in operations

Below are relevant financial results derived from the firm’s registration statement:

Total Revenue

Period

Total Revenue

% Variance vs. Prior

FYE September 30, 2021

$ 3,602,296

3298.1%

FYE September 30, 2020

$ 106,009

Gross Profit (Loss)

Period

Gross Profit (Loss)

% Variance vs. Prior

FYE September 30, 2021

$ 1,782,944

-891572.0%

FYE September 30, 2020

$ (200)

Gross Margin

Period

Gross Margin

FYE September 30, 2021

49.49%

FYE September 30, 2020

-0.19%

Operating Profit (Loss)

Period

Operating Profit (Loss)

Operating Margin

FYE September 30, 2021

$ (1,018,986)

-28.3%

FYE September 30, 2020

$ (3,190,201)

-3009.4%

Net Income (Loss)

Period

Net Income (Loss)

Net Margin

FYE September 30, 2021

$ (2,999,522)

-83.3%

FYE September 30, 2020

$ (4,566,303)

-126.8%

Cash Flow From Operations

Period

Cash Flow From Operations

FYE September 30, 2021

$ (557,417)

FYE September 30, 2020

$ (1,376,683)

(Glossary Of Terms)

(Source – SEC)

As of September 30, 2021, MDNA had $958,212 million in cash and $20.8 million in total liabilities.

Free cash flow during the twelve months ended September 30, 2021, was negative ($621,349).

MDNA Life Sciences IPO Details

MDNA intends to raise $24.6 million in gross proceeds from an IPO of its units of common stock (MDLS) and one warrant (MDLSW) per share, although the final figure may differ.

No existing shareholders have indicated an interest to purchase units at the IPO price.

Management says it will use the net proceeds from the IPO as follows:

to fund our research and development activities;

to fund the regulatory review process for each of our products;

to fund repayment of debt to vendors and management; and

for working capital and other general corporate purposes, including the additional costs associated with being a public company.

(Source – SEC)

Management’s presentation of the company roadshow is not available.

Regarding outstanding legal proceedings, management says the company is “currently not a party to any material legal proceedings.”

The sole listed bookrunner of the IPO is EF Hutton.

Commentary About MDNA’s IPO

MDLS is seeking public capital market funding to continue its diagnostic test regulatory review processes and to pay down debt.

The company’s financials have shown growing topline revenue, increasing gross profit and gross margin, reduced operating loss and lowered cash used in operations.

Free cash flow for the twelve months ended September 30, 2021, was negative ($621,349).

General & Administrative expenses as a percentage of total revenue dropped as revenue increased; its General & Administrative efficiency multiple was 1.7x in the most recent reporting period.

The firm currently plans to pay no dividends and intends to use any profits in the foreseeable future to reinvest back into the business.

The market opportunity for various biomarker early stage testing products is large but the firm faces significant competition from entrenched players as well as new would-be entrants.

EF Hutton is the sole underwriter and IPOs led by the firm over the last 12-month period have generated an average return of negative (64.7%) since their IPO. This is a bottom-tier performance for all major underwriters during the period.

The primary risk to the company’s outlook is the potentially long regulatory and uncertain process leading to an approval decision for each test.

When we learn more details about the IPO from management, I’ll provide a final opinion.

Expected IPO Pricing Date: To be announced.

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