• The market shows that biotechs are making a gradual comeback in 2023
  • What are some of the catalysts that will push this momentum further?
  • ASX biotechs that announced FDA breakthroughs this year


After a challenging 2022, we are finally starting to see the ASX biotech sector show signs of life.

The sector’s widely used barometer, the US SPDR S&P Biotech ETF index, also known as the XBI, has quietly risen by 6% over the past six months.

In Australia, the S&P/ASX 200 Health Care [XHJ] index has also climbed by 9% this year.

The surge has been driven in part by recent favourable drug launches and clinical readouts, as well as an increasing number of IPOs coming on to the market in the US.

Many analysts believe this momentum will continue for the remainder of the year and beyond.

RBC Capital Markets says that larger-cap healthcare companies, with revenue resiliency and less binary risk, will likely maintain their rebound in 2023.

In the smaller end of town, RBC expects even better performance as 2023 progresses.

“We believe there are select, high-quality, catalyst-driven smaller-cap biotech companies which remain under-appreciated,” said RBC.


What are the catalysts for a comeback?

Many analysts believe the current market landscape could be conducive to a rebound in biotech stocks.


A lower interest rate cycle

As inflation subsides, central banks would be thinking about pausing or lowering rates.

As a result, investors may rotate out of value and back into growth stocks like biotech.

Now read: Growth vs Value Stocks: Now that inflation has peaked, what’s the better bet?

In general, higher rates make it more difficult to raise money, particularly for smaller biotechs which are still unprofitable and burning through cash.

Higher rates also depress the valuation of growth stocks, as they make future earnings less valuable in the present.


Mergers and acquisitions

After two years of relative inactivity, large pharmas are flush with cash.

According to a recent report by Ernst & Young, large pharmas in the US have collectively more than US$1.4 trillion to fund M&A and strategic partnerships.

That cash is now starting to find its way back into the sector – for example in April, Merck acquired Prometheus Biosciences for almost US$11 billion.


A rejuvenated IPO market

The IPO market appears to be coming back, with several healthcare and biotechs being listed in the US in 2023.

The biggest so far has been that of Johnson & Johnson’s spun-off consumer brands division, Kenvue, which made its debut on the NYSE at a market cap of around US$40 billion.

Late stage biotech Acelyrin, which raised US$550m in the IPO round, was another notable listing as its shares began trading on the Nasdaq three weeks ago.


Short-sellers begone!

Bets against biotech stocks have surged since 2022, with 45 million shares of the XBI ETF index being shorted according to latest data.

But those sellers may soon run for cover as the Fed tilts toward loosening its policy, which normally signals a buy for the market.

When stocks’ prices rise, short-sellers could find themselves rushing to close out their bets (buying back their positions), accelerating the potential rally.


The FDA moves the needle

On the ASX, what usually moves the needles and gets Aussie biotech investors excited is the news of some sort of approval from the US FDA.

The FDA is the ultimate gatekeeper for the US pharmaceutical market, which is by far the world’s largest.

There are five applications and approvals that the FDA can provide a company with:

– Investigational New Drug (IND)
– New Drug Application (NDA)
– Abbreviated New Drug Application (ANDA)
– Over-the-Counter Drugs (OTC)
– Biologic License Application (BLA)

The FDA has also developed four designations to make some drugs available as rapidly as possible through:  a Priority Review, a Breakthrough Therapy, an Accelerated Approval, and a Fast Track Designation.

Receiving any one of these approvals or designations can have a significant impact on a biotech’s stock price for several reasons – the most important one being the potential and revenue generating opportunities it could bring.

An FDA approval also gives the biotech a competitive edge, because it grants the drug exclusivity for a certain period. In the case of a new drug, this exclusivity period means that generic competitors cannot enter the market.

There’s also partnerships and licensing opportunities that an FDA approval can potentially attract.

And last but not least, an FDA approval badge boosts investor sentiment and confidence in the company’s prospects.


ASX biotechs that announced recent FDA breakthroughs


Nueren Pharma (ASX:NEU)

The biggest ASX biotech breakthrough in 2023 was perhaps that of market darling, Neuren Pharma. 

In March, Neuren announced that its North American partner Acadia Pharma has received a “historic” US FDA approval of DAYBUE (trofinetide) for the treatment of Rett syndrome.

DAYBUE has since been made  available to the market to treat adult and pediatric patients two years of age and older suffering from the disease.

DAYBUE is the first and only approved treatment for Rett syndrome ever in the world.

Neuren is eligible to receive ongoing royalties on net sales of trofinetide in North America, plus milestone payments of up to US$350 million on achievement of a series of four thresholds of total annual net sales, amongst other payments.


Mesoblast (ASX:MSB)

The US FDA has accepted Mesoblast’s biological licence resubmission for Remestemcel-L in the treatment of children with SR-aGVHD (steroid-refractory acute graft versus host disease).

The agency said that it considered the resubmission to be a complete response, and has now set a potential approval date of August 2.

If approved, Remestemcel-L will be the first allogeneic “off-the-shelf” cellular medicine in the US, and the first therapy for children under 12 years old with SR-aGVHD.


Imugene (ASX:IMU)

Immuno-oncology biotech Immugene has received a US FDA Investigational New Drug (IND) clearance to initiate a Phase 1 clinical study of its oncolytic virotherapy candidate, onCARlytics.

The clearance allows Imugene to start patient recruitment and dosing of CARlytics (CF33-CD19), combined with blinatumomab in patients with advanced or metastatic solid tumors.


Radiopharm Theranostics (ASX:RAD

The radiopharmaceutical company said that the FDA has granted Orphan Drug Designation to its Ga68-Trivehexin (RAD 301) radiopharmaceutical technology.

Trivehexin is used to image patients with pancreatic ductal adenocarcinoma (PDAC).

Radiopharm has signed an exclusive licensing agreement with TRIMT GmbH for development and commercialisation of Trivehexin in the US, Australia, China, Hong Kong, and Japan.


Immuron (ASX:IMC)

The US FDA has removed the clinical hold on its New Campylobacter ETEC Therapeutic IND application, paving the way for  a clinical trial involving Immuron’s drug.

This comes after the US Naval Medical Research Center (NMRC) received an approval from the FDA to proceed with the clinical evaluation of a new oral therapeutic targeting ETEC disease, developed in collaboration with Immuron.

The first trial will evaluate infectious diarrhoea caused by Campylobacter and ETEC. A second trial meanwhile will focus on protecting volunteers against moderate to severe campylobacteriosis.


ImpediMed (ASX.IPD)

The medical software technology company announced that it has been given clearance by the US FDA for its SOZO Pro product.

SOZO Pro is the company’s next generation bioimpedance spectroscopy (BIS) system, providing personalised health metrics to quickly inform clinical decisions to health workers at the point of care.

Compared to SOZO, SOZO Pro offers a new, higher standing weight capacity (SOZO: 170kg; SOZO Pro: 220kg), and an updated stand design – allowing for easier transition between the standing and seated measurement positions.


Aroa Biosurgery (ASX:ARX)

Aroa has just received US FDA 510K clearance for its Enivo pump and catheter solution.

The device applies negative pressure to a surgical site, helping to reduce fluid accumulation following surgery.

It has been cleared for use in the removal of surgical and bodily fluids from a closed wound for hematoma and seroma prophylaxis following plastic surgery, or other general surgeries where large flaps are formed.


Pharmaxis (ASX:PXS)

The fibrotic diseases specialist says it will add a combination treatment arm to the current Phase 2 clinical trial of PXS‐5505 following an FDA feedback.

The FDA had examined safety and efficacy data from Pharmaxis’ Phase 1 monotherapy trial, and provided guidance including the number of patients, treatment dosage, study duration and endpoints for the study.

Following this guidance, Pharmaxis plans to submit a protocol amendment to global regulators, including the FDA, that will add an additional program to the existing myelofibrosis study.


CardieX (ASX:CDX)

The health devices and wearables tech company  said the US FDA has granted 510(k) clearance for its CONNEQT Pulse vascular biometric monitor.

The CONNEQT Pulse is a world-first multi-use vascular biometric monitor that provides measurements of both brachial blood pressure (the pressure at your arm), and central blood pressure (the pressure at your heart/aorta).

It incorporates CardieX subsidiary ATCOR’s SphygmoCor central blood pressure technology.

CardieX says the FDA clearance has the potential to dramatically improve access to remote patient monitoring with advanced biometric insights.


Nova Eye Medical (ASX:EYE)

Nova Eye confirmed that the US FDA has cleared the company’s newest generation canaloplasty device for canal-based glaucoma surgery, the iTrack Advance, for sale to surgeons in the US to treat glaucoma.

The original iTrack was the pioneering canaloplasty device that first established canal surgery for glaucoma. To date, approximately 120,000 surgeries have been performed by surgeons worldwide using that device.

The iTrack Advance meanwhile was designed to stretch the trabecular meshwork and create microperforations into the anterior chamber, and to remove herniations of the collector channel ostia.

With FDA clearance secured, Nova Eye said it could immediately commence the marketing and sales of iTrack Advance to US ophthalmologists for the treatment of glaucoma.


Botanix Pharmaceuticals (ASX:BOT)

Botanix says the US FDA has conducted the mid-cycle review meeting for Botanix’s lead product, Sofpironium Bromide.

The mid-cycle communication indicated that no significant issues were identified by FDA as a result of the review.

Likewise, there were no major clinical safety issues, no risk management issues, or advisory board requirements identified by FDA.

The planned FDA approval date for Sofpironium Bromide in September 2023 remains on track, says Botanix.


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