eureka report

Seem to be finally starting to build up some momentum with some more positive press today from Brendan Lau in the Eureka Report, focussing on USDA/Mastitis agreement, pain portfolio and the Novartis/Voltarin hook-up.

This budding biotech is maturing very nicely and the next 12-months will be critical in determining if Phosphagenics can morph from being a speculative drug developer into a “real” company.

I have been following the $133 million market cap biotech for some years now, and Phosphagenics has never really checked enough boxes for me to feel bullish about its prospects. There are always a few “holes” in the business that I had issues with, and its venture into the cosmetics market didn’t help its credibility, in my opinion.

But I am at the cusp of changing my mind, and it isn’t so much to do with the progress it has made in clinical trials of its through-the-skin drug delivery technology (called TPM), but the opportunity in the animal health market.

The United States Department of Agriculture (USDA) is fully funding a study using a TPM vitamin patch on cows to control mastitis (blocked milk ducts), and the results are likely to be released in the March quarter next year.

This study is the biggest risk to the commercialisation of TPM in the dairy industry and the US market alone is worth $US3 billion a year. A positive outcome will very likely lead to a licencing deal with a large pharmaceutical company.

The opportunity is bigger than any other human market application for TPM, and the path to commercialisation is a lot more straightforward as the approval process is not as stringent.

This isn’t to say that the human drug market opportunity is not significant either. Phosphagenics anticipates that it will sign a deal with a large pharma in the next 12 months or so for the use of a TPM patch to deliver Oxycodone and Oxymorphone (pain treatment drugs).

What is also overlooked by many in the market is the deal Phosphagenics has signed with Novartis to use TPM in Voltaren Gel. Sales of the new Voltaren Gel, which is used to treat joint pain, will start in the September quarter this year, and is likely to net Phosphagenics $5 million to $6 million a year.

Phosphagenics is only suited for those with a stomach for risk, but at around 13 cents, I think the risk-reward proposition is attractive.