IPO Preview: Renalytix AI Seeks U.S. IPO Investment

IPOStreet

Renalytix AI (RNLX) intends to raise $86.25 million in an IPO of its ADSs representing underlying ordinary shares, according to an F-1 registration statement.

The firm is developing an AI-enhanced diagnostics system for chronic kidney disease.

RNLX is still in development stage for its first system.

I’ll provide a final opinion when we learn more IPO details.

Cardiff, UK-based Renalytix was founded to create an artificial intelligence-based diagnostics system for kidney and potentially other chronic disease conditions.

Management is led by co-founder and Chief Executive Officer Mr. James McCullough, who was previously CEO at Exosome Diagnostics, a cancer diagnostics firm that was acquired by Bio-Techne Corporation in 2018.

Below is a brief overview video of the firm's approach:

Source: Health Professional Radio

The firm's first product is called KidneyIntelX and uses a proprietary algorithm 'that combines diverse data inputs, including validated blood-based biomarkers, inherited genetics and personalized patient data...to generate a unique patient risk score.’

Investors in the firm have invested at least $69 million and include the Icahn School of Medicine at Mount Sinai.

According to a 2016 market research report by Grand View Research, as a proxy for the firm's AI-enabled scoring system, the global kidney function test market size was $1.2 billion in 2016.

This represents a forecast CAGR (Compound Annual Growth Rate) of 5.2% from 2018 to 2025.

Key elements driving this expected growth are a growing prevalence of kidney disease believed to be aggravated by the adoption of unhealthy lifestyles as well as increasing diagnostic options and availability.

Also, the historical and expected future growth of the market in North America is shown in the chart below:

renalytixnamarket

Major market vendors that provide or are developing testing and analytics services include:

  • Quest Diagnostics (DGX)
  • Laboratory Corporation of America (LH)
  • ThermoFisher Scientific (TMO)
  • Danaher (DHR)
  • Roche Holding (RHHBY)
  • Abbott Laboratories (ABT)
  • Bio-Rad Laboratories (BIO)
  • Ortho Clinical Diagnostics
  • Siemens (SIEGY)
  • Various data analytics companies

Renalytix’s recent financial results are indicative of the firm’s pre-commercialization status for its system.

Below are the company’s financial results from March 15, 2018 to March 31, 2020 (Audited U.S. GAAP for full year):

renalytixpl

Source: Company registration statement

As of March 31, 2020, the company had $17.8 million in cash and $1.3 million in total liabilities. (Unaudited, interim)

Renalytix intends to raise $86.25 million in gross proceeds from an IPO of its ADSs representing underlying ordinary shares, although the final amount may be different.

Also, the firm is conducting a European private placement of as-yet undisclosed amount concurrent with the U.S. offering.

The firm’s shares are traded on the London AIM stock market under the symbol “RENX,” where it has a current market cap of approximately $318 million.

Management says it will use the net proceeds from the IPO 'for the continued development and planned commercialization of the KidneyIntelX platform, and the remainder for working capital and other general corporate purposes.'

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

Listed bookrunners of the IPO are J.P. Morgan and Stifel.

Commentary

Renalytix is seeking U.S. public investment capital to continue development of its lead product.

Assuming it receives FDA approval, management will seek to obtain payor reimbursement, commercialize its offering and expand into other functional areas

The firm believes that its strategic relationship with Mount Sinai will enable it to launch its system throughout Mount Sinai’s extensive New York system of healthcare facilities.

The market opportunity for chronic kidney disease control is expected to grow at a moderate rate in the years ahead; the firm will face significant competition in the market as there are many potential competitors providing directly or indirectly competing services.

J.P. Morgan is the lead left underwriter and IPOs led by the firm over the last 12-month period have generated an average return of 78.5% since their IPO. This is a top-tier performance for all major underwriters during the period.

Renalytix has its work cut out for it but a plausible path to market through its relationship with Mount Sinai.

When we learn more about the IPO’s pricing and valuation assumptions, I’ll provide a final opinion.

Expected IPO Pricing Date: To be announced.

Glossary Of Terms

(I have no position in any stocks mentioned as of the article date, no plans to initiate any positions within the next 48 hours, and no business relationship with any company whose stock is mentioned in this article. IPO stocks can be very volatile in the days immediately after an IPO. Information provided is for educational purposes only, may be incomplete or out of date, and does not constitute financial, legal, or investment advice.)

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