MoneyTalks is Stockhead’s regular recap of the ASX stocks, sectors and trends that fund managers and analysts are looking at right now.

Today we hear from Andrew Chapman, managing director of Merchant Group Australia.


What sector is hot right now?

“What sector’s not popular?” Chapman said. 

“We’ll always look a little bit contrarian in terms of what sector we’re looking at – the last thing I’d be doing at this point in time is a lithium deal because that sectors’ been super-hot and been really running. 

“Generally, in our fund, we look at sectors that are not hot. 

“We’re really focused on the biotech sector at the moment, because that’s an area that I think is certainly the most undervalued, or unloved, and under owned in the market at this point in time. 

“Specifically, within that biotech sector, the obvious one is medicinal cannabis stocks which have been down internationally about 90% in the last 12 months. 

“The demand for the product fundamentally is not going away, so sooner or later those, those stocks will have a pretty big run.”


Have any stocks in particular caught your eye?

“We’re more focused on cannabis plays overseas, one in particular that is probably listing in Germany called HAPA Pharm,” Chapman said. 

“We’re focusing on Europe because the European market is going to be the biggest one in the world.

“From an operational standpoint and legislative standpoint, the tailwinds are certainly in Europe.

“In the overall biotech sector, our main holdings include Race Oncology (ASX:RAC), Arovella (ASX:ALA), Neurotech (ASX:NTI), Inoviq (ASX:IIQ).

“We’re involved in … things like BCAL Diagnostics (ASX:BDX) as well – so we’re really in favour of the diagnostics sector of the biotech market.”


What’s the latest news for these stocks:

Race Oncology recently launched its new corporate strategy to focus on driving lead drug bisantrene’s commercial potential – with a clinical focus on investigating its anti-cancer properties.

The secondary focus is pursuing increased anti-cancer/FTO benefits of bisantrene, combined with current standard of care therapies in acute myeloid leukaemia (AML).

Arovella saw its share price more than double back in April after saying that lead drug ALA-101 confers significant anti-tumour effect and survival benefit in aggressive leukemia models.

Clinical data indicated that ALA-101 has the potential to be a novel ‘off-the-shelf’ cell therapy to treat CD19-expressing leukemias and lymphomas.

The company continues to advance its iNKT cell therapy towards first-in-human clinical trials. Neurotech is following in the footsteps of 2023 biotech market darling Neuren Pharmaceuticals (ASX:NEU) with another possible treatment for the rare neurological and developmental genetic disorder Rett’s syndrome.

NTI recently received Human Research Ethics Committee (HREC) approval and Clinical Trial Notification (CTN) scheme clearance by the Therapeutic Goods Administration (TGA) to investigate the use of NTI164 – the company’s proprietary cannabis derived drug formulation – in female Rett Syndrome patients.

The progressive neurological disease occurs almost exclusively in girls, with an incidence of one in 10,000 female live births which, executive director Dr Thomas Duthy says, equates to a US$2 billion market opportunity

Exosome and precision diagnostics company Inoviq signed a deal last month with Promega which will see the companies co-market a wide range of Promega manual and automated nucleic acid extraction reagents and instruments combined with the company’s EXO-NET exosome capture tools to enable their exosome isolation, biomarker discovery and diagnostics research.

Inoviq also recently reported high accuracy (87%), sensitivity (81%), and specificity (93%) results from an independent clinical validation study of its SubB2M/CA15-3 test for breast cancer detection, and is also developing an Exosome-based Ovarian Cancer Test (EXO-OC Test) for early detection of ovarian cancer in asymptomatic women. 

And just this month BCAL also announced breakthrough results and major steps towards commercialisation of its breast cancer diagnostic test, achieving sensitivity of 90% and specificity of 85.5%.

The company says the test should readily be capable of being replicated not only in the company’s dedicated laboratory in Australia but will enable blood samples to be analysed (using the BCAL test) in commercial laboratories throughout the world – meaning it can fast-track penetration into existing and new markets.

The company now expects first sales in the second half of 2024.


RAC, ALA, NTI, IIQ and BDX share prices today:


What should investors be looking for in a biotech stock?

Chapman says investors should look at things like cash balances, just to make sure the company is fully funded for at least 12 to 18 months, because with science and testing and technology, things always take longer and cost more than people anticipate. 

“I think you got to look at companies that have got healthy cash balances, and you got to look at companies that have got something unique, be it technology, a test or management or all three things,” he said.

“One of the key factors for us in investing in the biotech sector is you’ve really got to look at management, look at the detail about who’s who in the zoo, who’s on the board, who’s the CEO and can they commercialise? Have they had any experience in commercialising products before? 

“Because if you don’t have a commercial brain and a commercial handle or that sort of personality, you can go down the rabbit hole and never come back out.” 


At Stockhead we tell it like it is. While Neurotech International is a Stockhead advertiser, it did not sponsor this article.