MoneyTalks: This biotech focused fund explains why it invested $15m in these 2 ASX stocks
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MoneyTalks is Stockhead’s regular recap of the ASX stocks and sectors that fund managers and analysts are looking at right now.
Today we hear from BioScience Managers’ managing partner Dr Graham Crooke.
BioScience Managers is an Australian life sciences investor established in 2003 and has a solid investment record making over 200 investments across the globe.
One of these was Avita Medical (ASX:AVH) which it recently exited with an eight-fold return.
Its current focus has been its Biomedical Translation Fund 1 (BMTF1) which is intended to total $101 million and is 70 per cent allocated.
Stockhead spoke with Dr Crooke yesterday about why his firm invested in these companies.
Speaking about the broader biotech sector, he admits there was some disruption as COVID-19 hit the markets but the long term mission of the biotech sector has remained constant.
“Last year about this time everyone was saying the market’s going to decline and everything’s going to hit the pause button because of COVID,” he said.
“But what we’ve seen is a big growth in markets, particularly in healthcare. There’s been lots of investment in the sector – I think that’s good because we haven’t solved human disease.
“That’s what we’re trying to do, figure all this out. We haven’t solved human disease yet – and we’re looking at all sorts of ways to do that.”
This company has such a long history, Bioscience Managers has previously invested and sold out of it.
It was first spun out of Monash University in 1998 and has several drugs under development — all of which are applied topically (via the skin).
Dr Cook explains some forms of drug delivery (such as tablets) have potential to have an impact beyond the intended parts of the body and Acrux’s topical delivery attempts to to solve this problem.
And to top off the proposition, the price was attractive.
“We just saw the stock price again, and knowing the company as we do we thought it’d be a good opportunity. The strategy made a lot of sense to us,” Dr Crooke said.
“They really do have expertise in this whole process about formulating drugs for topical delivery so they’re into creams and ointments having to do with transdermal delivery of medicines.”
“We think they have good management, a good engine for developing new products, it’s got a clear focus on these transdermal drug delivery and we think there’s a big market for that.”
Cynata doesn’t go back quite as long as Acrux, but stem cell research in Australia does.
Dr Crooke explained that in the early 2000s, the USA imposed restrictions on federal money going to research on stem cells obtained from human embryos. This resulted in a significant amount of stem cell research going offshore.
“Australia was one of the beneficiaries of that, [being] able to ethically do large scale research,” he said.
Cynata isn’t the only stem cell company on the ASX, but BioScience Managers was attracted to it because of its stem cell technology that does not require multiple donors.
“We liked Cynata because they’ve got really good manufacturing technology, because they can make products for different things and essentially they’ve got their cells from one donor and they can scale those cells,” Dr Crooke said.
“They’ve can scale up rapidly and that solves all of the manufacturing problems. So we thought that stem cells are going to be important, you’ve got to be able to manufacture in a way the FDA’s going to approve you and we thought Cynata had good position in that.”
“And both of these companies we like because they have the ability to expand in Australia – to do more manufacturing and certain things in Australia. So we want to support that too.”
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