At that time, almost a decade ago, the veterinary market itself, not to mention biological drugs for dogs and horses, was absolute terra incognita. Therefore, it was difficult to obtain any capital from investors who did not understand the subject to develop the project. It would probably end up in a drawer if it weren’t for Paweł Wielgus’s ability to combine scientific arguments with business reality. The teammates quickly got along and founded the Bioceltix company in 2016. They divided their roles in the company, Łukasz Bzdzion – as its president – supervises the research part, and Paweł Wielgus ensures adequate capital supplies. Since they are both scientists, they understand each other without words.
Bioceltix. Stem cell drugs
Bioceltix is currently developing three flagship projects, two of them concern dogs – for degenerative joint changes and for atopic dermatitis. The third is a medicine for arthritis in horses. All of them are based on stem cells, so in addition to treating the symptoms, they also treat the causes of diseases. So far, the Wrocław-based start-up has raised PLN 40 million in private capital, plus another PLN 20 million in subsidies.
– At that time I couldn’t break into the business world. Now I know that I should have spoken a different language, admits Bzdzion.
Only Paweł Wielgus understood his argument about the therapeutic use of allogeneic mesenchymal stem cells. What’s more, he was able to quickly place it in business realities. Two points made the future partners almost meet. Initially, Paweł Wielgus saw himself as a dentist, but he failed the entrance exam for his field of study. He was just two points short of success. He decided to “winter” a year at the polytechnic, study and pass the dentistry exam at the second attempt. However, when he fell into the embrace of computational chemistry and molecular modeling, he quickly abandoned the concept of picking someone’s mouth. After graduating, he started his Ph.D. At the same time, he landed attractive internships in the USA and Germany.
Bioceltix from Wrocław obtained PLN 60 million for the development of the company, of which private investors and funds contributed PLN 40 million.
Photo: Łukasz Halczak / Press materials
The first start-up failed
When the internship ended, he returned to the Wrocław University of Science and Technology. However, he did not last long and took a job at the Association of Individual Investors, where he co-founded the intervention department. A few years later, he joined the Wrocław Research Center EIT+. He started as an analyst and ended up as a director. However, he was tempted to run his own business. In 2013, together with his then partner Andriy Vlach, who today deals with finances at Bioceltiks, he founded the first company Startit Fund, which values patents and technologies. In the meantime, Paweł Wielgus completed a postgraduate diploma in financial analytics. He wanted to understand what the financiers were telling him.
When financial surpluses appeared, the partners started thinking about their own start-up. They were interested in one of the patents for an anti-coronavirus substance. They bought a license and founded Startit Vet. They raised the first million for development. However, the project failed.
– We lacked experience, knowledge and a bit of luck. But then we learned a lot about running startup businesses and the veterinary industry, says Paweł Wielgus.
At the same time, they expanded the portfolio of their fund, today operating under the name Kvarko. The fund – according to its representatives – composed only of eccentrics and nerds, enters into deeptech projects that other investors are afraid of because they are difficult to understand. The largest company in which Kvarko has invested is Bioceltix.
During the first years of the company’s operation, money from financial surpluses was provided by the owners of Kvarko, but its needs became so great that additional capital had to be found.
– At that time, there was not a single registered biological medicinal product for animals on the market. Ergo, there was no market. There were no transactions and valuations, says Paweł Wielgus.
He heard the notorious “no, thank you” from the capital market. Finally, he went to an investor who provided money for his first unsuccessful project. He reminded that although Startit Vet was a failure, he had another, better idea and… asked for a second million. The investor agreed.
Then the first issues of shares in the company began. Initially, the securities were distributed mainly among friends, until the company finally found its way to NewConnect in 2021, raising almost PLN 8 million from the issue. The demand was many times higher, which resulted in a reduction of subscriptions by approximately 97%. in the tranche of individual investors. A year later, the company moved to the main trading floor.
– Having verified knowledge about the rapid market growth, above-average margins, low or no level of competition and a relatively low capital-intensive research process, we took a relatively low investment risk in relation to the expected rate of return. Even though the drug research process is very complex and unpredictable, the company surprises us with its timeliness, says one of Bioceltix’s shareholders. – This is a rarity in this industry – he adds.
Biological medicines are still a fledgling industry. However, it has huge potential due to changing social trends.
Photo: Marcin Biodrowski / Press materials
Bioceltix. A fourfold increase
Paweł Wielgus points out that in recent years, large veterinary companies have been willing to take over start-ups with an interesting product portfolio, but no income yet, for USD 100-500 million. This helped build the business narrative. He points to the global leader, Zoetis, whose revenues include drugs for atopic dermatitis in dogs, generating hundreds of millions of dollars annually.
Bioceltix shares, estimated at PLN 20.50 in the IPO, increased more than fourfold, to over PLN 88, despite uncertain macroeconomic prospects and generally weaker sentiments around unprofitable companies. The high price and investment interest were influenced by good readings from clinical trials last year, atopic dermatitis in dogs and degenerative changes in joints in dogs.
– Data published by the company indicate high effectiveness of the therapy with a high level of safety. Moreover, activity in the veterinary field allows you to target attractive sales markets, with a lower level of project failure and much lower costs of introducing drugs to the market. One may be tempted to say that Bioceltix has good prospects for the development and sale of projects – notes Katarzyna Kosiorek, an analyst from Trigon DM.
In her opinion, the fact that the Wrocław-based company develops veterinary drugs, mainly focused on solutions for humans, unlike other entities listed on the Warsaw Stock Exchange in the MedTech & Biotech industry, only benefits Bioceltix.
Despite this, as Eryk Szmyd, an XTB analyst, adds, some investors still lack fundamental knowledge about the products the company is working on. Therefore, they are not always ready to stay with the company’s shares for longer.
The president of Bioceltix himself admits that biological drugs in veterinary medicine are still an abstraction for many people, a very narrow field, and what’s more, the market is still in its infancy – in 2017, the first biological drug using a monoclonal antibody in the treatment of atopic dermatitis in animals was registered with the European Medicines Agency. dogs.
– However, the potential is huge, also due to changing social trends. Today, animals are treated as full members of the family, and the costs of therapy are less important, argues Bzdzion.
However, according to Eryk Szmyd, it is difficult to expect that in the future Europeans or Americans will have twice as many pets as they do now.
– The company will therefore focus on shares in a huge market, but with slightly limited growth potential – emphasizes Szmyd.
Bioceltix shares cost over PLN 88 on the stock exchange. Since its stock exchange debut, the company’s stock has more than tripled, despite weaker investor sentiment around unprofitable entities. The high rate was influenced by good readings from clinical trials published in the last year.
Photo: Marcin Biodrowski / Press materials
A market worth billions
Bioceltix’s capitalization alone is currently PLN 370 million. According to analysts, its proper valuation is hampered by the lack of free cash flow generation and product sales.
– Taking into account the estimated market value of approximately USD 3.2 billion. in 2032, the valuation of the company, which will compete with other entities on the niche market of biological medicines for animals, does not seem to be very low, says Szmyd.
In the second quarter of this year Bioceltix plans to submit applications for marketing authorization for the first product. It is supposed to be a drug for osteoarthritis for dogs. Sales are planned to start in 2025.
– Investment success depends on the success of the products the company is working on. Merely allowing them for sale may only result in short-term euphoria if sales turn out to be unsatisfactory. Investors have limited instruments that can assess the success of a given drug before it hits the market. To get there, it must go through a long and expensive regulatory process, emphasizes Szmyd.
Nevertheless, according to the analyst, once approved for marketing, the sales of Bioceltiksa’s drugs may be more than satisfactory. Also important is the fact that the company’s owners hold significant shares in it: Kvarko Group currently has 11.5 percent. Łukasz Bzdzion – approx. 9%.
Meanwhile, in this growing moment of tension, the partners continue to play basketball together.
– Just as we jointly pursue the goals of our company, we meet regularly on the pitch. We gain more points here and here. The game is worth the candle, assures Łukasz Bzdzion.
Summary
Paweł Wielgus and Łukasz Bzdzion chose the niche, difficult market of biological drugs for animals. They can make a fortune on it – Dorota Kaczyńska
2024-04-14 19:00:00
#met #started #company #billions
