Tony Locantro previously wrote NOX up nicely around float for...

Tony Locantro previously wrote NOX up nicely around float for those looking for an insight.

DYOR and all that, but gives a good overview of the state of play, and goes down well on a Friday

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Noxopharm (NOX) a 20c IPO, listed on Tuesday 9^th August 2016 and was immediately under selling pressure despite trading briefly at the issue price. Based on a lack of opportunities for clients to get involved at the IPO level I was relieved to see the stock trading around 18c, with even further selling emerging today taking the stock down to an intra-day low of 13.5c.  I feel that far too much emphasis is placed on how a company lists on the first day when you take into consideration the combination of those investing for the longer-term I.e. the believers, those chasing a stag profit or even the temptation to take the fees/brokerage and move onto the next opportunity. Whether a stock trades at 18c or 22c day one becomes a distant memory, although I have never forgotten the day when Sally Malay (which become Panoramic) listed just after S11 and was lucky to hold 12c before going on to become a significant nickel producer.

Prior to the IPO, Noxopharm appealed to me for a number of reasons which I will summarise below. I am sure there will be considerable skepticism and doubt surrounding Dr Graham Kelly’s claims, however this is all balanced with the potential for multiple share price upside should milestones be met and/or exceeded. It should be noted that Novagen (NRT), as idronoxil was advanced became a $1bn company and on a diluted basis Noxopharm (NOX) is capped around $10.15mwith only 33.35m shares currently tradable.

An introduction from Dr Graham Kelly and the NOX story can be viewed here.  The video is succinct and covers the fundamentals extremely well whilst eliminating the need for a lengthy opinion piece. NOX released an investor roadshowpresentation here and also partook in an interview with FNN.  The key is assessing the company’s prospects against the market capitalisation, upside potential and risk/reward profile. You can always purchase a great story but the key to speculation is either buying a considerable amount of bad news or a company with something lacking that has the potential to change and therefore re-rate. NOX has only just commenced life as a listed company but has a number of potential catalysts for a re-rating outside the simple exhaustion of the sub 20c selling. Dr Graham Kelly’s aim is to build a biotech company of substance and who is to say this cannot be done again?

Dr Kelly has now started a blog post aimed at keeping investors fully informed and the first clinical study is discussed hereVery pleasing to see this initiative taken and I am looking forward to further blog posts on the technology behind NOX66.

I am suggesting NOX as a HIGH RISK SPECULATIVE BUY up to 15c as losses are being taken from the IPO causing further panic.




KEY POINTS

• Noxopharm is addressing the biggest challenge facing  cancer patients – resistance mechanisms. These are biochemical mechanisms actively developed by cancer cells as part of their super-survival instincts. Some cancers have these mechanisms from the start (e.g. most pancreatic cancers), while others (e.g. breast cancer) mostly start off responding to drugs or radiotherapy but eventually become resistant to both. We die from cancer because we run out of therapeutic options and that comes down purely to resistance mechanisms. Without resistance mechanisms, there is no reason why almost every cancer shouldn’t respond to chemotherapy or radiotherapy, and to keep responding.

• The great majority of companies involved in researching and developing new cancer treatments have given up on tackling this problem head-on…disabling these resistance mechanisms simply has been too difficult. At the moment, the focus is on new drugs that fight the cancer through the body’s immune system, and while they are producing some encouraging results, everything continues to point to old-fashioned chemotherapy and radiotherapy as being the best we have and likely to stay so for many years to come.

• Noxopharm is one of the very few companies in the world tackling the problem of resistance head-on. And it is able to do this thanks to an innovative technology that it has developed around a drug called idronoxil. Noxopharm claims that idronoxil is the most powerful drug yet developed that knocks out resistance mechanisms in cancer cells, and its inventor, Dr Graham Kelly, formed the company, Novogen (ASX: NRT), to develop it to make cancer cells more responsive to chemotherapy. 400+ cancer patients later, Novogen was forced to admit defeat because of the way the body disabled the idronoxil and prevented it from working.

• Noxopharm is about to put this to the test. It is bringing NOX66 into the clinic later this year by using it in patients with late-stage cancers that have stopped responding to chemotherapy. The patients will be treated with NOX66 and then given the most potent chemotherapy of all – a drug known as carboplatin. If they can get the cancers to respond to carboplatin, then they will have achieved a major milestone in cancer therapy, and NOX66 will be on track to become a standard part of the way that cancer is managed.

If NOX 66 is ultimately successful then the upside potential in Noxopharm is enormous and you would assume many multiples of the current 14.5c share price. What is appealing though is that idronoxil advanced all the way to phase 3 trials before failing, and NOX could attain a share price re-rating through 1a/1b and phase 2 trials somewhat de-risking your entry price with profit taking opportunities along the way. The subdued opening performance from NOX does not detract from the longer-term potential and in no way should be viewed as a sign that the company is overpriced and/or NOX66 isn’t going to work. Whilst a 30c opening price would have been an ideal result for those who took up the IPO, nothing has changed apart from the opportunity to now buy below the 20c issue price with a view that once the “wall of breakeven sellers” is broken down there is every chance that NOX will re-rate into the low-mid 20’s.

Whilst I am not expecting NOX to attract a market capitalisation of $1bn as the drug did with Novagen, a $100m cap would see NOX trading around well in excess of $1.20, but a lot has to go right for this to occur.

I often get asked, ‘Should I wait a little longer before buying and see if it drifts even lower”, and my response to this is I honestly don’t know as I am not in the mindset of a seller nor am I a clairvoyant. The only way to own a stock that goes up a lot is to buy it in the first place and I am sure we all have a number of stocks where we were trying to perfect that last 0.5c-1c that has cost us a 5-Disallowed in the long run. As they say there is always a car with lower km, a woodgrain finish or the colour you really want for sale at a lower price once you have signed the contract.