Foreign investor appetite for selected Australian biotech stocks continues to rise, as giant institutional investor Fidelity doubled its exposure to a local stem cell outfit in the wake of other big plays by US majors for local biotech players.

Fidelity on Wednesday lifted its stake in Cynata to 10 per cent, tipping in another $5.2 million, after emerging with about a 5 per cent stake in May.

The shares — which have more than doubled this year — gained another 3 per cent to $1.29 by lunchtime Wednesday.

Its big hopes for Cynata (ASX:CYP) follow US drugs major Merck stumping up $500 million for Viralytics and PerkinElmer taking control of RHS, active in the field of genomics, in a $25 million deal.

Both those deals closed this week.

Foreign attraction

Cynata, which has developed a platform for the commercial production of stem cells has previously attracted the attention of offshore groups, with Japan’s FujiFilm moving to a 9 per cent stake last year.

The two had struck a deal earlier to work together to commercialise some of Cynata’s technology in the Japan market and beyond.

Faced with the collapse of demand for film, FujiFilm has expanded into a range of new industries, such as life sciences and medical technology.

Cynata Therapeutics shares (ASX:CYP) over the past year.
Cynata Therapeutics shares (ASX:CYP) over the past year.

Similar to the initial deal with FujiFilm, Cynata’s placement this week with Fidelity was made at a premium to the market price for its share, which surged Wednesday on the news.

Cynata placed the shares with Fidelity at $1.275 a share, which was a 4.5 per cent premium to the market price of $1.22 when the deal was done.

Investor optimism for the outlook for Cynata was boosted by the latest deal, with Cynata shares changing hands at $1.315 Wednesday afternoon, up 5 per cent, against the backdrop of a weak broader sharemarket.

The Fidelity deal has boosted Cynata’s sharemarket worth to around $120 million, with the shares more than doubling so far this year.

Stem cell maker

At its core, Cynata has access to technology which enables the production of commercial quantities of mesenchymal stem cells, which typically can only be obtained from donors, which limits the promise of stem cells in many prospective applications.

The placement with Fidelity will boost Cynata’s cash reserves to more than $10 million, which will provide it with a runway of well over 12 months at its present cash burn. Cynata said the money would strengthen its balance sheet.

“Their investment recognises the multiple and significant opportunities available to Cynata and the potential of our platform to develop stem cell products to treat a wide range of diseases,” the biotech’s chief executive Ross Macdonald said.

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