MoneyTalks is Stockhead’s regular recap of the ASX stocks, sectors and trends that fund managers and analysts are looking at right now.

Today, we hear from Paul Hart, executive director of Canary Capital.


Biotech is hot right now

Hart said that Canary Capital is currently very bullish about the biotech sector.

“There are many diseases where existing medicines have limited efficacy and many others where there are very limited or no treatment options at all – commonly referred to as an unmet need,” he said.

“At Canary we try to identify companies which are at the forefront of developing new or superior treatments for chronic diseases which take the lives of many people around the world each year.

“We look for companies which are developing new technology and treatments which have the potential to become new frontiers in medicine.

“There are three biotech companies which we at Canary believe have the potential to transform how many diseases and conditions are treated.”


Incannex Healthcare Limited (ASX: IHL)

Incannex is a clinical-stage pharmaceutical company focused on the development of unique medicines using cannabinoids and psychedelic compounds.

“The company is targeting major health problems for which there are limited or no effective treatments and therefore have enormous market potential,” Hart said.

“Incannex is the only ASX listed company focused on investigating psychedelics in combination with psychotherapy as a potential treatment for Generalised Anxiety Disorder. The company has a strong portfolio of patents which have been filed to protect its intellectual property.”

Hart says the company has a range of accelerated commercialisation pathways available including the FDA 505b(2) new drug application for product registration to create prescription medicines.

“Incannex plans to expedite its products through the Special Access Scheme in Australia and other regulatory bodies ahead of global registration and sales,” Hart said.

“IHL will develop multiple income streams from future drug sales post FDA registration.

“Incannex is also about to list on the main board of the NASDAQ in the United States.

“Given valuations are significantly higher for comparable US companies with a single drug development program, we see this as being a major value inflection point for Incannex which currently has six active drug development programs.”

The company is targeting large billion-dollar markets with unmet needs including:

  • Obstructive Sleep Apnoea – US$5.9 billion in 2019, CAGR 7.4%;
  • Traumatic Brain Injury – US$2.7 billion in 2019, CAGR 7.3%;
  • Lung Inflammation – Acute Respiratory Distress Syndrome, SAARDS and Pulmonary Neutrophilia (Total combined market of US$44.7 billion per annum);
  • Inflammatory Bowel Disease – US$22.4 billion in 2018, CAGR 4.4%;
  • Rheumatoid Arthritis – $US57.9 billion per annum in 2019, CAGR 2.8%; and
  • Generalised Anxiety Disorder – US$7.5 billion by 2023, CAGR 2.5%.


Exopharm (ASX: EX1)

Exopharm is developing transformative medicines using exosomes or extracellular vesicles (EVs) which can be used as precision medicine delivery vehicles (engineered EVs) and as regenerative medicines (naïve EVs) to mimic the power of stem cells.

“Canary Capital believes that exosomes are emerging as a potential new frontier of medicines which may be capable of treating a wide variety of diseases and conditions in humans with major unmet needs,” Hart said.

“The size of the markets for medicines treating the types of conditions Exopharm is interested in, such as those affecting the central nervous system, mobility and senses, are extremely large.”

The company is focused on commercialising its technology platforms, such as LOAD which allows cargo such as a chemotherapy drug to be loaded into the EV ready for transportation to its destination (e.g., a cancerous tumour), and EPVS which allows the company to attach proteins to the surface of exosomes, acting like an address on an envelope to deliver medicines to a targeted location within the body.

“EV-based medicines face the operational challenges of purifying and characterising EVs to a Good Manufacturing Practice (GMP) standard and being able to produce at sufficient scale and at low cost,” Hart said.

“Exopharm’s LEAP technology and associated know-how places Exopharm at the forefront of this emerging field worldwide – they are currently the only company globally to have a technology which can achieve this which presents considerable out-licensing potential.”

Exopharm also has an opportunity to develop its own medicines against COVID type viruses or to assist other pharmaceutical companies in commercialising so-called ‘stranded assets’ which are new medicines whose development has been stalled because of a lack of an effective delivery mechanism.

“Major deals, potentially worth hundreds of millions of dollars, have been completed by Codiak (NASDAQ:CDAK) and EVOX – and Exopharm has the technology platforms to complete similar deals,” Hart said.


Nyrada (ASX: NYR)

Nyrada specialises in the discovery and development of small molecule drugs to address unmet medical needs in cardiovascular disease and stroke and traumatic brain injury.

“Nyrada’s cardiovascular program aims to deliver a cholesterol-lowering drug to help people achieve a safe cholesterol level and reduce the risk of cardiovascular disease,” Hart said.

“The neuroprotection program aims to deliver the first treatment to prevent brain damage that can occur following a stroke, or from head trauma sustained in motor vehicle accidents, falls, and contact sports concussions.

“Both drugs have the potential to generate significant global sales if human trials deliver similar results to those which have been achieved in animals.”

Cardiovascular disease is the largest cause of death globally with 18.7 million people dying of the disease in 2019 – and in the US alone there are more than 600,000 deaths annually.

One of the major causes of the disease is a build-up of LDL cholesterol in arteries which can cause heart attack and stroke, and Nyrada is developing a PCSK9i inhibitor which lowers LDL cholesterol levels and could be taken orally once daily by patients who respond poorly to statins.

Results from a second preclinical trial in a specialised transgenic mouse model have shown cholesterol levels reduced by 46% and reduced by 65% when given in combination with the statin Lipitor – which alone only achieves a 27% reduction.

To put this in context, Lipitor is owned by Pfizer, and is the best-selling drug of all-time having generated more than US$160 billion in sales since its launch in 1997. While off-patent, it still generates annual sales of around US$2 billion annually.

On the neuroprotection side, Nyrada is aiming to offer a treatment for brain injury that prevents secondary brain damage, with around a third of the 15 million people globally who suffer strokes each year left with permanent disability.

“With a market that currently accounts for US$100 billion in direct and indirect costs, the level of interest in the development of a treatment for brain injury will be very high across the entire medical industry,” he said.

“There is also likely to be a significant level of interest from professional and amateur sports organisations and the military, as demonstrated by the company’s collaboration with the Walter Reed Army Institute of Research (WRAIR) and the UNSW. WRAIR, the medical research arm of the US Dept of Defense, reports that traumatic brain injuries are common in the military with 1 in 25 soldiers suffering a TBI during active service.”

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