Health Check: The robots are taking over biotech stock selection

Opyl has partnered to form the ‘world’s first’ AI-driven biotech fund
Visioneering sees a brighter future – elsewhere – but its shares tumble
Cyclopharm breathes easy after decent lung transplant trial results

Who needs fund managers to pick biotech winners?

Opyl (ASX:OPL) reckons the answer is no-one and is about to prove it with the world’s first AI-driven biotech fund.

Opyl has developed a platform called Trialkey, which uses algos to predict the result of clinical trials based on analysing more than 1300 variables across 468,429 clinical trials.

The company claims a success rate of 92%, but there’s a few industry sceptics and the methodology can be hard to follow.

To prove Trialkey’s chops, Opyl has partnered with L39 Capital to launch the AI-Powered Biotech Investment Fund, which will focus on investee companies carrying out active phase II or phase III clinical trials.

The robots won’t have time for any power lunching, with the fund trading up to 200 times a day based on trial “inflection points”.

The wholesale fund will launch with 20 initial investments locally and in the US, with targeted funds under management of $100 million within three years.

The fund is available to wholesale and sophisticated investors with a minimum investment of $50,000.

“Combined with our proprietary trading system, we believe this fund will deliver strong returns for our investors while driving innovation in the biotech industry,” L39 Capital says.

For its part, Opyl gets a $25,000 software license fee and a 25% share of fund income.

Opyl notes that an average clinical trial is only 28% likely to succeed, but Trialkey has identified studies with a more than 82% chance of meeting their endpoints.

The question is whether the fund can move Trialkey from a concept and monetise the advantage – and we will be watching closely.

At the very least, robots are ego-free – unlike their humanoid counterparts – and they don’t whinge about the size of their Christmas bonus.

Opyl shares gained 10% to 3.2 cents.

Bye-bye bourse

Ironically, Visioneering Technologies (ASX:VTI) shares this morning lost up to 61% of their value after the company said it would delist to improve its worth.

The Georgia, US-based optical group will hold a shareholders meeting on January 10 to vote on the delisting, with 46% shareholder Thorney Investments having the final say-so.

Visioneering developed – and sells – single-use contact lens for myopia (short sightedness) and presbyopia (long sightedness), but its long-term vision now doesn’t include the ASX.

The company cites a potent mix of a poor share price and low liquidity, which makes it difficult to raise capital on decent terms.

“These factors, as well as the costs and administrative burden of remaining listed on ASX, outweigh the benefits associated with remaining listed,” the company intones.

Visioneering listed in March 2017 at 42 cents and despite some sales success the company has lost most of its value over five years.

“Since listing … the valuation has been largely independent of news flows, even when positive news has been released,” the company rues.

“This has caused the board to question whether the market is fairly valuing the company.”

Visioneering believes that by going private, the company will be able to undertake larger, less dilutive capital raisings.

Visioneering also says it has engaged an M&A adviser to scour for a potential buyer, with some nibbles emerging. But Thorney says anyone who thinks the fund will dispose of its holding at anywhere near the current price is looking through rose-coloured glasses.

In February, nose-clip maker Rhinomed maker went private, citing similar reasons.

In other losses for the ASX, breast imager Volpara and orthopeadic play Allegra Medical Technologies were taken over during the year.

In November, Genetic Technologies (ASX:GTG) called in the administrators after a failed capital raising.

Meanwhile, only three life science companies listed this year: Blinklab (ASX:BB1), Vitrafy Life Sciences (ASX:VFY) and ReNerve (ASX:RNV).

Argent Biopharma (ASX:RGT) sought better fortunes on the London exchange, so we’ll also count that as a win.

Visioneering shares were 50% lower at 6.8 cents, ascribing a humble 3.3 cent market worth. Presumably the sell-off was the work of investors not wanting to be caught in an untradeable stock.

Capital-raising fiesta

Elsewhere, the daily string of capital-raising pronouncements continues, which shows that the ASX is not a wasteland after all.

This morning, LTR Pharma (ASX:LTP) said it had raised $25 million in a placement at 92 apiece, to further development of its erectile dysfunction treatment Spontan.

Paradigm Biopharmaceuticals (ASX:PAR) came good with $16 million placement, at 40 cents a share. The cash will help to fund the company’s upcoming phase III knee osteoarthritis trial, which some Paradigm observers reckon will cost up to $100 million.

Nyrada (ASX:NYR) raised $3.36 million in a placement in October, but – not unusually – investors snubbed the subsequent share purchase plan with only $85,000 of the maximum $1 million subscribed for.

Meanwhile, Syntara (ASX:SNT) shares this morning entered trading halt pending a raising.

LTR Pharma shares subsided 6.7% to 98 cents, while Paradigm shares lost 6.5% to 50 cents.

Cyclopharm looks for another indication

Having won US approval for its pulmonary embolism (blood clot) imaging device in the US, Cyclopharm (ASX:CYC) is working towards a new gig of assisting in the planning of lung transplant surgeries.

The device in question is Technegas, which involves the patient breathing a superheated radioactive, gas-like substance containing dry-carbon nanoparticles irradiated with the isotope technetium-99.

We know this sounds unhealthy, but it is safe and allows for superior three-dimensional imaging.

The company says a 74-patient, independent study showed Technegas to be effective in planning the surgeries. The study compared Technegas to the current standard ventilation imaging that uses 133-Xenon.

Carried out at Washington University’s Mallinckrodt Institute of Radiology in St Louis, Missouri, the study showed Technegas “outperformed Xenon in cases involving obstructive lung disease, due to its superior peripheral deposition and image quality”.

Technegas also avoided the “logistical complexities of radioactive gas handling associated with Xenon”.

The lung transplant pursuit is consistent with the company’s Beyond PE charter: finding indications beyond pulmonary embolisms.

“By validating its clinical equivalence to Xenon and highlighting its operational benefits, this independent research paves the way for broad adoption of Technegas across a range of respiratory conditions in the world’s largest healthcare market,” says Technegas chief James McBrayer.

Cyclopharm shares eased 4.8% to $1.59

At Stockhead, we tell it is as it is. While LTR Pharma and Paradigm are Stockhead advertisers, they did not sponsor this article