Money Talks: Could one of these stock picks be the next ‘billion-dollar biotech’?
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Money Talks is Stockhead’s regular drill down into what stocks investors are looking at right now. We’ll tap our extensive list of experts to see what’s hot, their top picks and what they’re looking out for. Today, we hear from Stuart Roberts, co-founder of Sydney-based Pitt Street Research.
Roberts says the biotech sector has been hot in the US for the “best part of 10 years now”, and investors in Australia now want in on the action.
“Ever since the end of the global financial crisis there’s been a steady flow of successful US biotechs jumping into the post-billion-dollar category,” he told Stockhead.
“And the belief is that in a country like ours, which manages to generate a fair few biotech success stories, out there somewhere is another billion-dollar company in the works.
“It doesn’t mean there isn’t the occasional clinical failure. But investors tend to expect that one of these days one company will hit the big-time and the stock will end up making a million-times more than the value at which these stocks are trading at the moment.”
Roberts has two promising biotech picks for investors today — $65m PainChek (ASX:PCK) and $107m Neuren Pharmaceuticals (ASX:NEU).
PainChek has created an app that can track a person’s facial muscles to determine the level of pain they are in, even if they can’t vocalise that pain.
“As you can appreciate, a tool like that is useful in assessing pain in nursing homes where about half the people have dementia,” Roberts said.
The stock more than doubled in price recently, after PainChek revealed it had secured a $5m grant from the federal government to facilitate the implementation of its pain recognition app in Australian residential aged care centres.
“They’re gradually going around rolling up contracts with leading residential aged care facilities,” Roberts said.
Meanwhile, Neuren Pharmaceuticals has developed a drug that can treat a condition called Rett syndrome — a debilitating neurological disorder that occurs primarily in baby girls.
The drug is going into phase 3 studies in the second half of this year after the company secured a licensing deal with US biopharma Acadia Pharmaceuticals.
“The market knocked the stock down quite heavily but that doesn’t change the fact that this drug is now going into phase 3 with the help of a well-heeled US company,” Roberts said.
Stuart Roberts is the founder of and senior analyst at NDF Research, an independent equities research firm that specialises in ASX-listed life science companies. He is also a co-founder of Pitt Street Research, another equities research firm whose area of focus is the entire spectrum of ASX-listed companies.