Special Report: Santa has come early for PharmAust with the Australian Tax Office (ATO) granting a refund of more than $550k after approval of its application for a Research and Development Tax Incentive (RDTI), topping off a strong year for the clinical-stage biotech.

The ATO has approved PharmAust’s (PAA) RDTI application with $553,435.28 deemed refundable on its FY23 tax return – with the funds having hit the company’s bank account today.

The RDTI scheme is jointly administered by the ATO and AusIndustry, under which companies can receive up to a 43.5% refundable tax offset of eligible expenses on R&D activities.

“We appreciate the continued support and acknowledgement by the Australian Government for the critical work undertaken in our R&D programs,” PAA finance director Sam Wright says.

2023 has been a strong year for PAA after hitting several clinical milestones.  In a tough year for the ASX healthcare sector, the company has stood out as a strong performer, with its share price doubling since January.

“It’s been a great year and fantastic result for shareholders with the share price doubling from around 6 cents at the start of 2023 to 12 cents now,” Wright says.

 

Funds add to ~$3.5m cap raise

Wright says receipt of the R&D refund further strengthens PAA’s financial position to execute on its upcoming clinical trials following a strongly supported capital raise.

PAA last week announced prominent Perth-based fundie Merchant Funds Management will become a strategic investor and it had received binding commitments to raise ~$3.46 million through an oversubscribed placement.

The company says the raise was priced at a 4.8% premium to the 15-day VWAP and a 10.8% premium to the 30-day VWAP, reflecting new institutional shareholders’ growing confidence in its achievements over recent quarters, as well as a positive outlook.

The strategic placement was granted primarily to Merchant Funds Management, within its Merchant Biotech Fund, who approached PAA to become an investor.

Merchant Biotech Fund and associated parties subscribed for $2.1 million of the offer.

The remaining $1.4 million of the placement went to sophisticated Australian, Hong Kong, and Singaporean investors, including existing eligible shareholders, along with Wright.

The placement will see PAA issue ~34.6 million new shares at an issue price of 10 cents/share, each with a 2:3 free attaching option exercisable at 15 cents with an expiry of December 31, 2025.

“We’ve certainly had strong and growing support from existing retail shareholders but also institutional shareholders on the back of results and upcoming catalysts,” Wright says.

PAA will now leap into 2024 with around $6 million cash in the bank.

 

Funding for upcoming clinical trials in year of catalysts

PAA is now well funded for 2024, in what is set to be another big year for the company which recently completed Phase 1 MEND study of the drug monepantel (MPL) in patients with motor neurone disease (MND/ALS).

PAA is due to release top line results from the study in Q1 2024. All patients from the Phase 1 trial have also been invited to move to a 12-month open-label trial.

The company will also use data from the Phase 1 study to open an investigational new drug (IND) application, with the FDA to start a Phase 2 study in H1 CY24.

PAA has applied for an orphan drug designation (ODD) with the US FDA for MPL to treat MND/ALS.

The FDA’s ODD program aims to incentivise development of drugs for rare diseases, defined as affecting less than 200,000 people in the US.

An ODD offers various incentives including tax credits and market exclusivity for several years.

On the upside for shareholders, research shows an ODD can also lead to a surge in share price.

Research by Blue Ocean Equities corporate advisor Matthew Baker has found that an ODD announcement led to an 11-fold average increase in intraday volumes (with a median of 6.7 fold increase), often coinciding with price spikes.

“Remarkably, 70% of investors saw an average of 29% improvement in their holdings in the week following the announcement (median 9%),” Baker says in his research article.

PAA is also looking to advance its study of MPL treatment for canine B-Cell lymphoma into a field study in the US early next year in about 60 dogs, lasting for about 12 months.

“We’ve certainly got lots happening in 2024 and some key catalysts, building upon what has been a strong year for PharmAust,” Wright says.

 

 

This article was developed in collaboration with PharmAust, a Stockhead advertiser at the time of publishing.

 

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

 

Blue Ocean acts as corporate advisor to PharmAust and has equity in the company.

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