Here’s why biotech Dimerix is on a golden run

Special Report: Drug developer Dimerix hasn’t been affected by the March market rout and since April has surged. What is behind this push?

Shares in drug developer Dimerix (ASX:DXB) have doubled in value in the last six months and the stock has been on a tear since late April, as investors get set for what they hope to be positive clinical trial results in the middle of the year.

Dimerix shares rose from 11c in November to 24c this week, valuing the company at about $43.5m.

Little has changed in terms of the company’s plans but there are several details that investors, both retail and professional, are getting excited about.

“There are a number of reasons why our share price has not only held up during that difficult period in March but has continued to rise. First and foremost, we suspect it is the realisation that we are now very close to data in two very commercially attractive markets, and it’s not unusual to see interest taken in companies at this stage,” CEO Nina Webster says.

“In addition, once we issued our quarterly report it was clear to investors that we had sufficient capital to take us well past when our clinical trial data is due, which removes another risk.”

Investors pinning hopes on the data

Dimerix has a drug development platform technology that can identify protein receptor combinations which can be used to treat diseases.

Its lead drug, DMX-200, is an adjunct therapy, meaning it is given to patients alongside the current standard of care medication.

Dimerix has two Phase 2 clinical studies running now for DMX-200 in two different indications: a phase 2 study testing DMX-200 in diabetic kidney disease and a phase 2a study looking at the rare kidney disease focal segmental glomerulosclerosis (FSGS) for which it has been awarded Orphan Drug Status in the US and Europe.

Both are on time and on budget — rare for any clinical trial but especially so now during the COVID-19 pandemic — and the results for both are due in the middle of 2020.

“We’ve consistently advised shareholders throughout the COVID-19 pandemic that we’ve had no delays to either study. In fact, we announced early during the pandemic that we had contingency plans in place to keep the clinical trials moving, and these contingency plans have proven very effective,” Webster says.

Dimerix also has a preclinical program for a treatment dubbed DMX-700 for Chronic Obstructive Pulmonary Disease, or COPD, a progressive and life-threatening lung disease, as well as a pipeline of other drug candidates-in-waiting.

Investors, looking ahead to what might happen once the results are in, have compared the company to other ASX biotechs that have seen massive share price movements following the release of positive phase 2 trial data.

Opthea (ASX:OPT) became a billion-dollar company last year after delivering on time and on budget a phase 2b trial into the eye disease wet age-related macular degeneration (AMD), and it’s set to repeat that with a phase 2a into diabetic macular edema (DME).

Paradigm (ASX:PAR) too surged in August after its phase 2b study demonstrated that injectable Pentosan Polysulfate Sulfate (iPPS) reduced cartilage degradation.

But neither has had the sustained price trajectory through the rout in March that Dimerix has experienced.

Webster says a good comparison is Chemocentryx, a US based company currently worth $US3.4bn, which has a similar FSGS drug in a phase 2 study and with results coming out at a similar time as Dimerix. In fact, analysts from SVB Leerink believe that the single FSGS drug candidate makes up about 10 per cent of Chemocentryx total value, thus being valued at $US336m ($525m).

It’s a buy, analysts say

In November Taylor Collison labelled the company a speculative buy with an outperform rating, and in March Argonaut followed suit.

They put a 40c target on Dimerix with a valuation that is double again what it is now.

“Dimerix is in the fortunate position of having two phase 2 studies of lead drug DMX-200 fully recruited and due to report results Q2 CY20,” Taylor Collison analyst Dr Dennis Hulme wrote last year.

“We suspect the market has ignored the potential value of DMX-200 due to what we view as unfounded concerns about the key ingredient in DMX-200 being sold as a dietary supplement.

“We do not believe dietary supplements will stop DMX-200 from generating multi-billion-dollar peak sales, if approved.”

Argonaut put a $US700m figure on the US FSGS market and a $US1.1bn value on that country’s diabetic kidney disease market.

Analyst Michael Eidne took heart from treating physicians’ requests to the Therapeutic Goods Administration (TGA) Special Access Scheme to allow patients to remain on DMX200 when they complete the studies. These requests have been approved.

As a result, Dimerix has multiple patients from both the 2017 phase 2a and current phase 2 study remaining on DMX-200.

“We believe if the mid-year study results are successful, DXB has the potential to rerate strongly due to the market appeal of the indications they are studying. DXB has $3.85m in the bank and is well funded to complete its current studies and programs,” Eidne wrote in March.