Why we doubled down on Kinoxis.
We recently announced Kinoxis Therapeutics Pty Ltd $14.5M Series B and our participation in this round. The funds raised will advance their lead candidate (KNX100) into Phase 2 clinical trials targeting agitation and aggression (A&A) in dementia. This is set to begin this month on the Sunshine Coast, Australia. We’re pleased to be partnering with Uniseed, the University of Sydney, Unisuper and Avicella Capital in this round.
Contents
- The adjacent value
- Playing offence
The adjacent value.
At the time of our first cheque, it seemed Hugh and Michael were on a path to significantly transform the standard of care in opioid withdrawal treatment. A market notoriously difficult to crack due to limited efficacy, cardiovascular risk and tricky patient profile. NIDA (National Institute of Drug Abuse) bet on Kinoxis to change that, pouring millions into the development of their lead candidate KNX100.
Today, KNX100 has demonstrated utility beyond substance use and diversified into four programs —most notably Dementia. The rationale for this approach has been driven by three factors ; promising pre clinical/safety readouts, commercial interest, asset centricity.
Multiple pre clinical models demonstrated the potential for KNX100 to not only induce well characterized anti-addictive and prosocial effects but also serenity. These findings provided a powerful argument to move into the “adjacent value” — the behemoth that is Dementia. Remember we may view substance use and dementia as discretely unique, but in behavioural disorders, the same circuitry can contribute to a range of disease phenotypes. We call this “pleiotropy” in Neuroscience and it’d be foolish not to take advantage.
The argument for commercial interest is intuitive. CNS/Psychiatric assets are hot property in Biopharma, and I don’t see interest subsiding anytime soon over the remaining LOE period. Dementia affects more then 55 million globally, and is growing 20% annually. It’s the kind of silent killer that sneaks into the room unnoticed, and before you know it, it’s robbed a person of not just their memories but their very essence of being. The primary contributor to this reality is the agitation and aggression behaviors experienced by 80% of sufferers. The battle with their own mind, turns to their environment and the people around them. This scenario is a fast track to increased hospitalizations and ultimately, earlier mortality. There is only one FDA approved treatment and many off labels. Risperidone (atypical antipsychotic) is currently used off label as a first line treatment. It is generic, affordable for patients but is both sedative and known to possess off target cardiovascular effects . Together increasing the likelihood of falls. KNX100 is looking to be the first to solve for both and reduce the mortality rate 2–3x. If it can do so, it’ll be a good candidate for first line. The risk still exists around time to onset and under utilisation of oral medications. Dementia patients can be challenging and stubborn treatment group.
Kinoxis are progressing a single asset KNX100, after last year licensing their KNX200–400 molecules to Boehringer Ingelheim for $180M US. Lots of investors I speak to are wary of concentrating risk. My view is that if done right, there are huge efficiency gains from asset centricity. Remember KNX100 have diversified into two additional SUD programs beyond the OUD + A&A. Methamphetamine use disorder program that will run in Australia first. In addition, they have inked a partnership with the NIAAA to run an Alcohol use disorder program — on prevalence alone, the largest commercial opportunity in SUD (~30m people ages 12 and older had AUD). An initial POC (Phase 1) alcohol interaction study is about to commence. The NIAAA have taken 9 compounds through its process and several of those to FDA approval.
In short — four programs for the effective cost of two.
Playing offence.
This was our first cross over investment at Stoic i.e investing out of more than one fund to increase exposure. This is not so common practice in venture capital due to potential LP-base conflicts. So why do it?
The decision to follow on was preemptive. We’re buying at a relatively good cost-of-equity, supported by internal outperformance relative to the portfolio.
Good COE = Likelihood of success ( Statistical and company precedence) x valuation upside.
Likelihood of success= Inferred from pure statistics, 27% of phase 2 assets in CNS/Psychiatry progress on average . Collective experience (Team + Board + KOL) and execution ability in clinical trials would suggest Kinoxis are not just average.
Upside potential = Attractive valuation relative to industry median(including regional discount), largest value inflexion from Phase II asset success across clinical dev, median exits in Psychiatry/CNS range from in the mid hundreds of millions to several billion.
As I will detail in an upcoming memo on follow on strategy, relative portfolio outperformance is measured on four factors ; resource utilisation, execution velocity, ROI and solvency. Kinoxis key advantage has been its capital efficiency. When was the last time you heard a Series B biotech with four assets, multiple programs raise 14.5m AU.
Kinoxis are now embarking on multiple Phase II programs, and their continued partnership with Boehringer.
If you’d like to learn more about our portfolio or our new fund, drop me a line.
Kinoxis press release + website.
Disclaimer
Stoic Venture Capital is a licensed venture capital fund manager (Stoic Venture Capital ILP) under the Venture Capital Act. The fund remains under the guidance and authority of the Australian Securities and Investments Commission (ASIC).
This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or digital assets are for illustrative purposes only, and do not constitute an investment recommendation or offer to provide investment advisory services.
