DEAL DETAILS
Startup: Phoenix PharmaLabs
Security type: Common stock
Round size: Side-by-side raise – up to $1.07 million under Reg. CF
Share price: $1.00
Valuation: $26,790,283
Minimum investment: $99.00
Investment portal: Netcapital
Deadline: March 23, 2021 (Phoenix has requested an extension to April 23, 2021, but it has not yet been approved.)
Dear First Stage Investor:
We’ve already recommended Phoenix PharmaLabs (PPL) once — some two years ago. It was a no brainer back then, oozing with upside. I was hoping it would raise again — and it is! I was expecting progress. But I got so much more. In a singularly bold move, it’s raised the investment opportunity to a whole new level. This I didn’t expect.
Now — even more than two years ago — PPL is everything early investors want. No other company in our First Stage Investor portfolio has a higher upside. But I love what it’s done to derisk the investment even more. I’ll explain in a minute the unexpected gift Phoenix is now offering to investors.
But first, a little refresher. Many of you weren’t around when I first recommended PPL. Briefly, Phoenix is developing opioids. But not the addictive opiods that are killing 1,000 people a week in this country. Phoenix is developing non-addictive opioids.
And yes, there is such a thing — or there could be. This is what Phoenix is developing. There are dozens of pharmaceutical companies looking for their next blockbuster drug. Yet, few of them are doing what Phoenix is trying to do. Just one other company — Astraea Therapeutics — is developing a similar pain-killing drug. But the beauty of the non-addictive opioids being developed is it isn’t a winner take all scenario. In fact, whoever makes it to market first is likely paving the way for the other to get an equally (if not more) lucrative payout. And with good reason.
Pre-clinical tests show that PPL’s drugs are up to 100 times more powerful than morphine in dulling pain. They also come with a bunch of no’s (in a good way). No euphoria. No addiction. No withdrawal. And no dependence.
No other drug class can credibly make these claims. Not cannabinoids. Not even peripherally acting opioids. Phoenix’s development of its PPL-103 drug represents a true breakthrough opportunity. Here’s what I said when I first recommended the company.
Phoenix could help save tens of thousands of people from a debilitating, soul-destroying life of drug addiction. And our health system could save billions of dollars. This tiny company could put a stop to the raging epidemic of opioid addiction. Imagine that.
Back then, there was real reason to believe that Phoenix had a realistic shot to develop the world’s first safe, effective, non-addictive opioid. The drug had gone through multiple safety and efficacy studies with flying colors.
And now?
Now, my reasons to believe in Phoenix have quite literally doubled. Phoenix has acquired one of the other two known drugs in the world that appear to provide potent, safe, non-addicting pain relief. It attacks the brain somewhat differently than PPL-103, but like PPL-103 it only partially stimulates the Mu receptor (the type of nerves that opioids target to reduce pain). Aggressive stimulation of the Mu receptor causes euphoria and leads to addiction. Partial stimulation avoids those side effects. This new drug — now called PPL-138 — provides long-acting pain relief of more than 24 hours with no tolerance. If all goes according to plan, Phoenix will develop it into a highly effective non-addictive treatment for chronic pain. And PPL-103 will be used for treatment of acute pain. Both drugs also have promising potential as therapies for opioid and cocaine addiction.
The takeaway for all investors is that the investment opportunity is now more derisked. If one drug doesn’t live up to its promise in human clinicals, Phoenix has the other to fall back on. By doubling the drugs it’s now developing, PPL has cut the technology risk in half.
PPL-103 is nearly finished with its preclinical phase. PPL-138 has about nine more months of preclinical trials to go. Preclinical studies are the first step all drugs take on their road to FDA approval. These studies provide information on dosing and toxicity. If those tests go well, the next step is human testing — called clinical studies or trials.
PPL plans to bring both drugs through the first phase of human clinicals. Then the drug which shows the more progress will proceed to the next stage — the proof of concept phase (or Phase IIA).
Assuming good results, the fun will then begin. Many large pharmaceutical companies have already expressed strong interest in licensing Phoenix’s non-addictive opioid once the company establishes proof of concept. That means Phoenix will have no problem licensing its technology to the highest bidder, with upfront and milestone payments totaling in the hundreds of millions of dollars — followed by royalty payments. It will use that money to fund its other drug through the proof of concept phase. And it expects a similar revenue windfall if the results are good.
This extremely high upside is about 3-to-4 years away. So let’s discuss the risk side, which is just as appealing as the upside, in my view.
Unlike 98% of early-stage startups, the marketing and execution risks are off the table. As regards execution, the biggest challenge will be to manage costs. That’s not easy.But CEO Bill Crossman and his colleagues have done a superb job to date keeping costs below what would be considered reasonable. Bill is very good at finding third-party companies that specialize in various aspects of drug trialing, which reduces the costs for PPL. Bill is a savvy businessman and has put together a strong internal and external team. The company is in good hands. There’s enough history there to fully expect execution not to be a problem.
As for marketing, the drug will practically sell itself if it can successfully go through the first phase of human clinicals. But if not? Well, there’s nothing the company can do at that point. It’s truly binary. Spectacular success or complete failure.
Which leaves technology as the one big risk to consider. The technology is promising and works in animals. But it’s still not proven in humans. It’s where Phoenix’s quest could all fall apart.
But the vast amount of opioid testing data on animals and humans that shows opioids have similar effects on both. It’s a critical point that Phoenix rightly emphasizes. Here is what it says on its raise page on Netcapital…
Research has shown that there is an extremely high correlation between these animal studies and Human Abuse Liability studies and other indicators that measure the potential for abuse and addiction in humans.
Elsewhere on the raise page PPL makes this point with even more conviction…
A vast amount of opioid testing data is available concerning the transition of effects of pure opioid compounds from animals to humans. Thus there is a high level of confidence that this compound will be safe, effective and beneficial for humans.
Bill Crossman told me he’s confident the drugs PPL is developing will be “safe, effective and beneficial for humans.” Co-founder Larry Toll is also convinced. And Larry should know. He’s the author of more than 130 peer-reviewed scientific papers and a recognized expert in the field of neuroscience. Larry specializes in addiction neurobiology and the pharmacology of drugs with potential addiction liability, such as opioids.
One of the few people to rival Larry’s deep knowledge of opioids is his co-founder and fellow collaborator, John Lawson. John worked with Larry for a decade during his stint at the Stanford Research Institute. It was at SRI that John discovered this new class of opioids that Phoenix is now developing.
So, this is how the upside and risk is shaping up. Phoenix has done a great job at diluting the technology risk. But it’s far from entirely eliminated. And the upside is absolutely massive. Proof of concept is still about three years down the road. And there are no guarantees that it will achieve proof of concept.
Since the upside is the “given” in this investment opportunity, it’s the risk that we have to pay the most attention to. Early investing is generally risky. Investing in early-stage biotech carries even more risk. But the risk here is surprisingly small compared to the company’s huge upside. This breaks the mold. Usually, high upside comes with high risk. And that is what makes this such an exceptional investment opportunity.
If PPL is successful, it will make you a great deal of money. Just as important, it will save countless lives, improve countless more and reduce the pain and suffering of billions of people.
Bill’s stepson was addicted to opioids for more than 18 years. Other members of the team have friends and family who were addicted and even died from opioid overdoses. For Bill and his team, the bonus is the money. Giving the world a pain treatment and addiction therapy that’s non-addictive is the mission. Investors can enjoy both worlds. Wealth or health, Phoenix aims to have a massive impact.
How to Invest
Go to the Phoenix PharmaLabs’ investment page on Netcapital.com. If you don’t have an account on Netcapital, you’ll be prompted to create one. Follow the steps and fill out the required information. This shouldn’t take more than a few minutes. Then click on the orange box that says “Invest.”
Now choose the payment method that works best for you to transfer the funds. Your money will be held by an escrow agent until the deal closes, when it will be transferred to PPL, and you will officially own a piece of this exciting, innovative pharmaceutical company.
Risks
This opportunity, like all early-stage investments, is risky. Early-stage investments often fail. Phoenix PharmaLabs might need to raise another round of funding in a year or two, if not sooner.
If it executes well, this shouldn’t be a problem. But that’s a risk worth considering when investing in early-stage companies. The investment you’re making is NOT liquid. Expect to hold your position for five to 10 years. An earlier exit is always possible but should not be expected.
All that said, I believe Phoenix PharmaLabs offers an attractive risk-reward ratio.