MoneyTalks: Brokers see blue sky for these 3 ASX biotech stocks, with massive price targets
Broker Taylor Collison sees an Outperform for Pharmaxis (ASX:PXS) as the biotech accelerates plans for its anti-fibrosis drug, PXS-5505.
Pharmaxis is expected to expand its ongoing Phase II trial to include an additional combo therapy arm that will treat myelofibrosis (MF) patients with PXS-5505 in combination with standard-of-care JAK inhibitor therapy.
The decision to expand the trial was based on feedback from the FDA, which has reviewed interim safety and efficacy information from the ongoing monotherapy MF trial.
If the combo arm starts in Q4 this year, this would allow a final 24-week data readout in Q1 of 2025.
“As the trial is open label, we would expect interim data updates in 2024,” said the broker.
“If the interim data is sufficiently encouraging, we could see a decision to progress to a pivotal randomised Phase IIb/III trial taken before the end of 2024.
“We could also see PXS enter partnering discussions regarding PXS-5505 at this time,” Taylor Collison added.
Pharmaxis also expects to report top line data from its trial of PXS-6302 in patients with established scars in Q2 this year, after completing patient recruitment in December.
Results so far have shown positive changes in the appearance and pliability of the treated scars in the first eight patients.
The randomised component of the trial should give a good indication of the potential of PXS-6302 to reduce the excessive scar formation.
Taylor Collison said it has a target price on PXS of 19c (versus current price of 5.5c), or 17c if a potential $12m capital raise in FY25 goes ahead.
Broker Euroz Hartleys has a Speculative Buy recommendation on Botanix Pharma (ASX:BOT), putting a target price of 28c versus the current share price of 8.7c.
Earlier this month, BOT successfully completed its FDA mid-cycle review meeting for Sofpironium Bromide.
The company also raised $10 million via a single tranche placement at 9c, with funds to be allocated towards commercialisation activities ahead of FDA approval in September this year.
Euroz says the FDA communication read very positively, with no significant issues identified as part of the review process, including no major clinical safety issues or risk management issues.
“Furthermore, the FDA confirmed no advisory board meeting would be required, adding that the application, in its view, presented no novel or complex regulatory issues. We continue to view this as a positive,” said the broker.
Finally, the FDA indicated that continued discussions will now focus on labelling, clinical outcome assessments, patient instructions and brand name.
“In our view, this represents a substantial de-risking of the approval, as we view the progression towards labelling discussions amongst other items to infer the FDA is largely satisfied with the primary aspects of the review.”
Euroz believes that BOT remains considerably undervalued in comparison to its peers.
There are several factors underpinning this view, including the fact that Sofpironium Bromide has proven itself in Japan, where it is already approved and selling.
Euroz believes Sofpironium Bromide could potentially do +US$100 million of sales in the US based on the number of prescriptions the drug is currently doing through its partner in Japan, a country a third the size of the USA.
In addition, companies undertaking an FDA review on their first drug have typically re-rated through the FDA review, seeing an average 102% re-rate and $760 million valuation by this time into the review.
“Whereas BOT has only re-rated 58%, and from a small base, with its $140 million valuation well below the peer average.
“So our analysis suggests BOT may be the cheapest ASX-listed company to have filled for an FDA New Drug application,” said Euroz.
“We maintain our Speculative Buy recommendation with an increased 28c per share.”
Meanwhile, Euroz Hartleys has a Buy recommendation on Paragon Care (ASX:PGC), the medical equipment and devices supplier, with a price target of 50c (versus current share price of 27c).
In the first half, Paragon reported a 38% increase in revenue to $154m, and a 41% increase in NPAT to $6.3m (on pcp).
The company has also guided the market to a 30% underlying EBITDA growth for the full year.
Euroz says these results were in line with its own forecasts, with earnings growth mainly reflecting the uplift from Quantum and SMS product sales.
“The second half is expected to mirror the same market and operating trends seen in the first half,” says Euroz.
PGC has said that it remains committed to building a $100m EBITDA business over the next 3-5 years.
“As our forecasts imply, M&A is likely to play a part in achieving this. PGC has stated this will be more of a focus over CY23 – and importantly, through a more strategic lense,” said Euroz.
PGC has also entered into new financing arrangements with NAB and HSBC, which includes revolving cash facilities.
“We anticipate this will enable PGC to optimise its balance sheet and reduce cash holdings, and we have now modelled this,” said the broker.
Looking at the bigger picture, PGC has made significant headway in the advancement of key strategic initiatives, with the company having made considerable progress on the integration of acquisitions and the refinement of its strategy.
“Beyond FY23, we continue to model a conservative level of earnings growth, achieved through a mix of revenue growth and margin expansion,” said the broker.
The views, information, or opinions expressed in the interview in this article are solely those of the brokers and do not represent the views of Stockhead.
Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.