Bargain Barrel: Buys in the battered ASX biotech sector? Ask Boreham!
Health & Biotech
Health & Biotech
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The deep sell down of the US biotech sector has resulted in the valuation of many of the ASX-listed life science plays looking a tad sickly, too.
Arguably, many of them were overvalued in the first place. But in many cases the companies are further down the development path than a year ago and are well funded.
Some are even generating revenue (yes, you heard that correctly).
The Nasdaq biotech index has slid around 17 per cent over the last year while the global benchmark – the S&P Biotech Select Industry Index – has fallen by around 40 per cent.
In the US, investment bank Jefferies recently estimated at least 30 biotechs were trading below their enterprise value.
Stockhead’s bottom trawlers can’t quite find that level of extreme value locally, but here are five unloved ASX biotechs that could be just what the doctor ordered:
The spray-on skin developer once synonymous with burns surgeon and Australian of the Year Fiona Woods has lost 60 per cent of its value over the last year, yet is selling approved burns products in the US and is eyeing Food & Drug Administration assent for the bigger markets of vitiligo and soft tissue injuries.
Dual listed on the ASX and Nasdaq, Avita reported revenue of $US14 million ($19 million) for the December 2021 half, up 37 per cent.
The acid test of value is that Avita had around $140 million of cash at last count, but is trading at an enterprise value (market cap less cash) of around $100 million.
Avita shares hit a record $16 in early 2020, valuing the stock at more than $1 billion.
A pioneer in first-line pain relief, Medical Developments has seen its shares fall an agonising 40 per cent over the last 12 months.
Medical Developments has had great success in revitalising an old drug, the analgesic penthrox, which it sells in multiple countries.
The drug is best known as the Green Whistle – the penthrox dispenser that sports people suck on while limping off the ground with torn hammies and injured knees.
A notable gap in the company’s global coverage is the US, but the FDA has now lifted a clinical ‘hold’ order on a planned phase III trial for first-line relief.
At its peak Medical Development was valued at $780 million but is now worth $250 million.
The distinction between fat and dense breasts sounds like locker room banter, but it’s a serious topic when it comes to detecting breast cancer on images.
The Auckland-based Volpara developed Volpara Density, an algorithm-based tool to measure breast density and thus identify at-risk women for more frequent examinations.
Volpara chalked up customer receipts of $NZ7 million ($7.5 million) in the December 2021 quarter. Revenue for the year to March 2022 should be $NZ25 million or thereabouts, 25 per cent higher than previously.
Volpara shares have lost around one-third of their value over the last 12 months, with the company now valued at $220 million.
The brain cancer drug developer is availing of a novel collective path for its phase III trial which should slash the time and cost of bringing a therapy to market.
The pathway is via GBM Agile, a global trial of five drugs tackling the hard-to-treat glioblastoma.
Kazia’s candidate paxalisib tackles the glioblastoma multiforme variant which accounts for about 15 per cent of all brain cancers.
While glioblastoma remains the flagship indication for paxalisib and is by far the most advanced, Kazia has five other clinical studies underway and has in-licensed an unrelated cancer drug candidate.
While Kazia shares have rebounded over the last month, they still have lost almost 20 per cent of their value over the last year, for a market cap of $145 million including $15 million of cash.
Dimerix shares have lost more than 40 per cent of their value over the last six months, which seems scant reward for a kidney and respiratory drug developer entering phase III trials.
The company’s key focus is focal segmental glomerular sclerosis (FSGS), an inflammatory kidney disorder which is currently untreatable and often leads to outright kidney failure.
Dimerix’s lead compound is DMX200, or propagermanium, which is not a flower but an agent that blocks the chemokine receptors bringing inflammatory cells into the kidneys.
The company has launched a phase III trial across 70 sites in 12 countries and also has a diabetic kidney disease program.
Dimerix is deploying the same mechanism of action to target late-stage Covid induced pneumonia and the earlier stage respiratory effects of the virus.
Remember Covid? We may have learned to live with it, but globally it’s still creating several hundred new cases per day.
Granted – drug development is a ‘do or die’ proposition and the commercialisation odds are unfavourable. But Dimerix’s $46 million market valuation – backed by $16 million of cash – seems overly stingy.
This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.