Starpharma is one of Bell Potter top picks for FY18

I received a report today updating top stock picks of Bell Potter for FY2018

Below are the relevant extracts from this brief







Amongst the small cap stocks including biotech’s many of the stocks under research coverage have continued to deliver progress in the clinic.

Standouts include Starpharma, Viralytics and Mesoblast each of which have short term price catalysts

Starpharma (SPL)

Starpharma is a Melbourne-based platform company commercialising the science of nanoscale polymers called dendrimers.

Its proprietary dendrimer technology is versatile with wide applicability across the pharmaceuticals sector.

In drug delivery the company is focused on oncology (cancer).

Events over the last 6 months have transformed the company and we believe its pharmaceutical pipeline is approaching key inflexion points which can drive a significant re-rating. SPL’s strong cash position of ~A$60.7m and sharpened focus on its core high value add pharmaceuticals business (drug delivery and VivaGel portfolio), following recent sale of its agrochemical business underpins its future growth.

We believe the company is self-funded now and its strengthened balance sheet will assist it in ongoing partnering negotiations for VivaGel Bacterial Vaginosis (BV) and allow it to accelerate development of its internal DEP drug delivery candidates.

Results from VivaGel R-BV Phase 3 trials are expected in July’17.

We expect a marketing application for BV treatment to be submitted to the FDA in 3QCY17. SPL has engaged a US bank to assist it with a competitive process ongoing on partnering BV.

We expect a licensing deal for BV in 3QCY17 will lead to further cash injection and allow SPL to focus on the drug delivery business.

Results from Phase 1 DEP docetaxel trial are expected in mid CY17, with a Phase 2 to start later this year targeting 1-2 cancer types. DEP cabazitaxel is expected to move to Phase 1 trials in 2HCY17 and DEP irinotecan into Phase 1 in 1HCY18, which will add further value to the business.

We also are encouraged between the deepening ties between AstraZeneca (AZN) and SPL. SPL received an A$2.6m milestone recently from AZN on completion of pre-clinical studies on the first drug candidate under their partnership.

We expect presentation of data on this candidate towards the end of CY17 followed by the drug moving into Phase 1 trials which would trigger another milestone to SPL.

We speculate that the AZN/SPL drug is a dual BCL-2/xl inhibitor being targeted at a broad range of blood cancers.

This is a well validated target, hampered by a narrow therapeutic window and on-target bone marrow toxicities.

If we are correct we believe this candidate has the potential to become a valuable asset for AZN given their focus and increased investment on building up their blood cancer pipeline.

Progress of this asset towards the clinic therefore bodes well for SPL/AZN’s long term collaboration and AZN’s interest in SPL. Buy, speculative, Valuation $1.17/sh