Phosphagenics (POH)The biotech stock’s 29 per cent fall from...

Phosphagenics (POH)

The biotech stock’s 29 per cent fall from grace this year makes it the third-worst performer on the small ordinaries.

Unlike Bradken, the company hasn’t taken a misstep but has been shunned for its volatile nature and lack of earnings certainty.

While Phosphagenics (which is developing a way to administer drugs through the skin) is speculative by just about any measure, the sharp decline presents an interesting entry point for investors with some patience and a stomach for risk.

RBS Morgans believes the stock could re-rate in the March quarter next year, when Phosphagenics starts on its phase-three clinical trial for its oxycodone patch.

The company has also developed a cosmetics range using its skin adsorption technology, and struck an agreement last month with David Jones and UK-based Boots to distribute the range. The cosmetics are already being sold in Asia through the Watsons chain.

However, investors will have to wait until 2013-14 before the company records any meaningful profit, although the wait may be compensated for given RBS Morgans has a target of 30¢ a share, while Bell Potter has a target of 40¢ a share.

The stock is retesting last September’s low of 15¢.

http://afr.com/p/markets/market_wrap/bruised_but_ready_for_rebound_