Investor Connect 883: TEN Connect May 2026 - Part 3

Narrator: Foreign.

Hall T Martin: This is the Investor Connect podcast program. This is Hall T. Martin. I'm the host of the show in which we interview angel investors, venture capital, private equity, family offices and many other investor groups for startups and growth companies. I hope you enjoyed this episode. Thank you for joining us.

Aaron Cortland: Foreign.

Wolfgang Sedate: Thanks for coming any day. We're addressing the global opioid epidemic with a novel medicine that works as a neuromodulator. And I'll uh, talk about how that works. But I think everyone here is familiar with the crisis. In spite of all of the efforts to arrest it, you know, it continues on unabated primarily because, you know, if you're suffering from moderate to severe pain, whether it be acute or chronic, there really are, ah, no other therapeutic options other than opioids. And then of course they carry a significant risk of addiction and dependence. So Our novel compound ATX 1209 works as a, as a modulator to the opioid receptor by suppressing the dependent signals and preserving the analgesic signals with one pill. And so we're developing this in combination with opioids as a safe pain therapy without the risk of addiction. We're also developing as a treatment for opioid use disorder and we can als. We also have evidence in animals that we can prevent and treat neonatal opiate withdrawal syndrome, where there's about 30,000 babies born every year in this country addicted to opioids. Here's a quote from Dr. Phil Skolnick. He is a world renowned neuro researcher. He recently joined our board. He's also on the board of Gilgamesh, which is sold ABVI for about 1.2 billion. And his validation indicates that, you know, there's some folks in the field who really like what we're doing. So the investment thesis is as follows. We're going to go to Australia, we're going to conduct two clinical studies. They're going to cost in total, including all the ancillary costs, roughly around two and a half years and $10 million. And with those two studies, we'll generate a level of human validation that should benchmark based on recent deals done in this space to about a, conservatively about a 10x return to our investors within that two and a half years. We've already completed human safety, we've got clean toxicology, we've got a whole battery of non clinical studies that suggest or that prove actually that this drug consistently in animals decreases dependence and preserves analgesia across multiple species. The addressable market is huge. Obviously our IP portfolio is extensive, going out to 2042 with new applications that could extend that. And our team has successfully developed and registered a number of drugs, including in the addiction space as well as gotten our investors many exits with prior companies. So we've got a lead investor in for about four and a half million dollars. On a $9 million note, we're going to go ahead and raise 10. The pre money on that is 13.3 million. It's, it's convertible note and we're hoping to close this July, at least for the first tranche. We have funded this company with about $5 million in grants plus some additional seed money. And that was done by Wolfgang Sedate, who's on the call. So here's where we're focusing. You know, there's a lot we could do but we're being very stage gated and capital efficient about this by combining our drug with an opioid. We're going to go to Australia and study this drug in patients that are on chronic opioid therapy and to test basically the hypothesis that this drug will provide opioid equivalent analgesia without the risk of addiction. If we can prove that, then that's the value inflection point. We're also going to generate safety data from that study to feed into a registrational plan for the neonate indication, which is also a pediatric orphan indication, which as you may know, would qualify for a PRV voucher. The last one sold for about $200 million in December. So this is where we're focusing. That would be a liquid oral formulation as a commercial presentation. The commercial presentation for the pain market would be a cold formulation, one single tablet. Our drug combined with an opioid as a second generation opioid. So the market obviously, as we all know, is large, but it's actually the opportunity is larger than it looks on paper primarily because there is prescription hesitancy right now on opioids. So if we actually had something that provided opioid equivalent and Magesia without the safety liabilities, we'd expect that mark to expand also. The $13 billion US market is based on generic pricing. So any premium, generic pricing is also going to expand the market. If this drug were to actually work, it would become standard of care relatively quickly because it would be medically irresponsible for any physician whoever prescribed a first generation opioid ever again. On the right is an example of another market where that happened, where warfarins were the dominant product on the market for anticoagulants for many years. And then as safer drugs came along. They converted that market very quickly until Eliquis came along, which became the dominant player based on a superior safety profile from all the other drug classes. And they'd achieved 60% market share relatively quickly. So we'd expect a pretty rapid conversion. Our team is quite seasoned and quite successful. I invited much of our team to join us on the Q and A M primarily because I just like to showcase this team whenever I get a chance for myself. I've spent about 25 years in this industry in leadership roles, operational, financial as well as business development at large pharmacists. I also was on the early team of Coheras where we went from a startup to a $200 million IPO within about four years and on to a $1.2 billion valuation. Bruce Ember has developed a number of addiction drugs successfully and registered them. Wolfgang CD is the brains behind this discovery out of UCSF in Ohio State. He's a world renowned researcher with over 400 publications focused on a number of fields but including addiction and pain biology. And Laurence Noor has joined us as well, our very capable chief operating officer. So one of Wolfgang's or his primary finding a few years ago was how opioids actually drive dependence. It really wasn't known until then and this is actually considered a novel finding in the field. What he realized is that actually with repeat stimulation of the receptor in the brain called new opioid receptor, it actually activates it and creates a really loud state in form of the receptor. So it actually changes form and it's this really loud active state that vibrates very loudly after repeat stimulation that actually drives all of the bad stuff we associate with opioids. It is dependence and hyperalgesia and so forth. So the question became, well, maybe what we can do is modulate the receptor in a way that preserves analgesia signal but basically tones down this active state. And so he discovered this compound ATX1209, which basically binds to the receptor with the same kinetics as the opioids do, but then gradually, without blocking analgesia, gradually reverses that state back to the resting state, blocking off the negative signals. And so he's proven this in multiple animal models that we believe are predictive of the human condition. So here's our development strategy. First let's go to Australia and establish a proof of principle in patients with chronic opioid therapy. That's the cheapest way to go prove this drug works and the fastest. From there we can then go straight into a registrational study for the neonate indication. So we're going to go to Australia, we're going to do basically, uh, two studies. One to confirm the safety and generate the pharmacokinetic data we need with the oral formulation. Prior safety data was done with the uh, prior formulation. So we'll basically do that study to pick a dose and go into our phase two, a study where we'll measure the effects of dependence and the effects of pain on patients from baseline. So at baseline these are patients who are on chronic opioid therapy. They have a baseline level of opioid dependence. They have a baseline level of pain management. We give them a dose of our drug on top of their opioids. Within two to three weeks we ought to be able to see very quickly a decrease in the dependent scores from baseline and no change in analgesia. These are standard assessment tools, a uh, combination of subjective assessment tools and objective assessment tools. They're validated, they're used quite routinely in pain and addiction studies. And so with this data we uh, believe it would be a pretty significant value inflection point. So from an investor perspective, we'll close the $10 million, $13.3 million pre money. We'll go make a batch of GMP material. The process is already established. We've already got patheon set up to do that. We'll go to Australia, we'll go to the PK and clinical proof studies. If those read out positively, positively be defined as change from dependence, change from baseline, sorry, independent scores, no change in analgesia, then we'd be looking for an exit at that point. There's been two deals done recently in the non addictive pain space. Both of those were the floor on those was $300 million the last 12 months. We'll have a level of human validations from these studies that they're successful that exceeds what are those assets at at the time of those deals. So if we don't get the exit we want at that point, there'll be one additional raise and one additional study and that would be the now registration study and that would make this basically commercial ready. The PRV voucher itself would easily fund the launch, plus have cash left to give back to the shareholders at that point, if we don't have an exit, the first bite definitely get an exit the second bite of the apple with an approved orphan drug and a pipeline full of a novel therapy going after a $30 billion market. Here are the terms of the note. Pretty standard structure. You can see the use of proceeds and I want to point out that what we're doing is different than what everybody else is doing. If you were to take a look at everything in development right now for the pain market, you'll see that a bunch of different targets being worked on. The problem is if you stack those up, uh, in terms of analgesia versus safety, opioids are the most analgesic, they provide the best pain relief, they have a lousy safety profile. Obviously every other approach is going after sun non opioid target that unfortunately just doesn't hit the mark in terms of pain relief. So they're all compromising efficacy for better safety. That's the approach the entire field is taking. So if all those products were to be successful and get approved, opioids still aren't going away. Because if you're going to treat moderate to severe pain post surgery or otherwise, you're still going to need an opioid. Even if all these drugs work. The sodium channel inhibitors up here, NAV 1.81 just got approved. The launch has gone horrible. Very modest efficacy. Their chronic pain study failed and we're looking at this field and saying, well, if opioids aren't going away, why don't we just make them safe? We're the only TPP in development basically with opioid equivalent analgesia without a safety risk. There's no other, there's no other drug in development that can make that claim. So in summary, you know, this is obviously has potential to make a huge societal impact. We all know people with stories similar to these people here on the right, the bottom girl there is one of our co founders, daughters. So this is very personal for us. But also I think we've developed the risk plan to basically provide our investors a risk adjusted attractive rate of return and we've got the right team in the plan to execute.

Hall T Martin: Great, great presentation. Aaron Cortland, what's your first question?

Aaron Cortland: Aaron, good to see you again. I don't really have a whole lot of questions. The only concern I've got is the group up in Montreal that is developing a similar product to what you are. And I think they're about six months ahead. How are you going to make up the difference?

Wolfgang Sedate: I'm aware of a group in San Francisco taking a similar approach. I'm not aware of the Montreal group.

Aaron Cortland: Yes sir.

Wolfgang Sedate: What's their target? Do you know? Do you know what their target is?

Aaron Cortland: I don't know, I don't remember off the top I remember that it's um, an opioid replacement type of therapy and I don't remember that much about it.

Wolfgang Sedate: Okay, so Bruce, why don't you start with describing how our approach differs than most of the others.

Bruce Ember: Yes, absolutely, Aaron, I can do that. So I think, Kotlin, it goes to your question because most of the field has tried and I've done a lot of work working with pharmaceutical companies on developing better uh, opioid agonist and better uh, opioid antagonist. But the problem is that as Aaron said, it doesn't solve dependence. Uh, you can have safer opioids, but you still become dependent. What we propose here is to have something that could be an add on to any opioid. So it's opioid agnostic. And basically what it will do if we are successful is that it will remove any risk of dependence without touching the benefits that you can have from your opioid. So that's something that's never done before. That's basically you, the dependence without disrupting any of the clinical benefits that patients are taking the opioid for. And I, as far as I know, and we will look into that. What is done in Montreal, as you said, I'm not aware of any companies who is doing something like that without.

Wolfgang Sedate: Yeah, yeah, go ahead. Yeah, so, you know, pulling on the thread there, but most of the folks that are targeting the opioid receptor are either developing partial agonists, which by definition means they don't have the same level of analgesia as a full agonist. And they're doing that to get a better safety profile. Or as Bruce pointed out, they're trying to somehow antagonize receptor to eliminate the side effects of an opioid. We're not doing either because we have. Wolfgang has tried low dose antagonists in the past prior to his discovery here. And no matter what you do, you still induce severe withdrawal effects. So this is the only compound we've identified that actually modulates, uh, in the way that we're doing it.

Bruce Ember: Yeah, and I can add for that for antagonists most of the time, or not most of the time, but always you need to discontinue opioids before you can take, think about naltrexone or uh, uh, antagonists like that. You need to discontinue your opioid treatments before starting the new antagonist treatment. If you don't do that, patients will go into painful withdrawal. Here with ATX1209, we don't have any risk of as. Again, if we are successful, we don't expect any risk of precipitated withdrawal. So basically we can replace, we can act as an add on to any opioids with keeping the same positive effects from the opioid without any of the negative effects. So it's basically safer opioids.

Hall T Martin: Do you have any other questions, Korlan?

Aaron Cortland: No, sir, not at this time.

Wolfgang Sedate: Great, thanks.

Hall T Martin: Andy, do you have a question?

Aaron Cortland: Sure.

Narrator: And this is just general question. I've not invested in pharmaceuticals in many, many years. But general question, what would you estimate your time to market before it actually gets out there? All the requirements, uh, and testing and. Yeah, that's, that's gonna be my primary question.

Wolfgang Sedate: Yeah. Well, one more.

Narrator: Do you expect this to the likely outcome that somebody's gonna buy your, the, the rights to this, this drug and one of the big pharmaceuticals, or would you anticipate that you would expand this line? Just general probability.

Wolfgang Sedate: Yeah. So our investor would not mind us having an early exit. So basically our base case plan is if we generate this data. Andy, I'll take your second question first. Then we'll be right here with basically significant proof of clinical evidence that this drug is working in humans the way we think it's supposed to work. That data set benchmarks at $300 million plus based on two deals done in the last 12 months. One was the Tigo Biosciences and the other one was Lilly's takeout of Site 1. Both of them were working on sodium channel inhibitors. This would be a greater level of human validation in the clinic for a non addictive pain drug that either of those assets have. So assuming the current market holds up, this thing benchmarks to an exit within two and a half years. That's our base case plan. If the market changes for some reason, we don't get the deal we want. Then to answer your first question, we would go to the FDA file an IND for an uh, pediatric orphan disease called nals, Neonatal open withdrawal syndrome. Given that it's pediatric orphan, there are no other treatments for that for these babies they would. Regulatory requirements would basically state that study would be a registrational study by definition. So one single registrational study, it'd be a relatively quick study. The endpoint would be shortened weaning time in the NICU. Currently in the NICU, three to four weeks. If we could shorten it by even 30%, that would be considered commercially viable. Then that would be roughly from time to IND to time to launch somewhere between about two to three years. So you're looking at an approved commercial product within three years after long, long worst case, after we get these Australian studies done. So that's roughly about five years total from today.

Narrator: Got it.

Wolfgang Sedate: And then back to your question on pharma. You know, this is an area that's interesting, people. It gets hot and cold. There's been, you know, there's been some failures, as you may know, in this field, but now that there are, you know, the FDA has, has gotten so adamant and bending over backwards to approve non addictive drugs, you know, there's, there's new players coming in, so there's a lot of pods we can go fishing in and we'll be talking to all these players, you know, in parallel with our Australian studies, to kind of prime the pump before we get there. Cool.

Hall T Martin: Great.

Aaron Cortland: Very good.

Hall T Martin: Great, great questions, guys. Thanks so much for that. Let's go to our final presenter. We have with us today Randy Hubbell of Solaris endovascular. Randy, if you could launch your slides and kick off when ready. Investor Connect helps investors interested in startup funding. In this podcast series, experienced investors share their experience, experience and advice. You can learn more@investorconnect.org Hall T. Martin is the director of Investor Connect, which is a 501c3 nonprofit dedicated to the education of investors for early stage funding. All opinions expressed by hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.