A series of successful phase two clinical trials and increasing commercial adoption in the US market for Aussie biotech companies have driven the creation of three new billion-dollar healthcare stocks in just a few months.
In the past six months more than $3.25 billion dollars has been added to the valuations of a handful of small and mid cap healthcare stocks like Avita Medical, Opthea, PolyNovo and Paradigm Biopharmaceuticals.
The unique momentum in the sector is in stark contrast to a year ago when some significant phase two clinical trial failures resulted in investors turning away from the risky sector.
The more risk that's taken off the table in terms of investment, the more reward you get.
— Tanushree Jain, Bell Potter
Speaking to The Australian Financial Review,Bell Potter healthcare and biotech analyst Tanushree Jain said investors were recognising the growth potential of this next wave of biotech success stories, with some like Opthea also considered potential acquisition targets for big pharmaceutical giants on the back of stellar clinical trial results.
"We're now getting companies that are moving out of the research development phase, starting to generate revenue and having commercial products in the US market," Ms Jain said.
Paradigm Biopharmaceuticals
Another firm which is yet to crack the $1 billion market cap milestone but has gone on a tear this month is Paradigm Biopharmaceuticals, which has jumped from a share price of $1.37 in late August to $2.53 on Friday – a rise of 84.7 per cent.
The company, founded in 2014 by chief executive Paul Rennie, hopes to commercialise a new treatment for osteoarthritis by re-purposing existing drug pentosan polysulphate sodium (PPS), which historically had been used as a mild blood thinner.
Paul Rennie's Paradigm Biopharmaceuticals is developing a treatment for osteoarthritis that helps with pain management, but also stops the disease progressing. Supplied
Unlike currently available anti-inflammatory and analgesic therapies, which just relieve the pain of sufferers' symptoms, Mr Rennie believes PPS will not only reduce people's pain but also improve their joint health, reducing the breakdown of cartilage that's associated with the condition.
Like Opthea, it has impressed investors with promising phase two clinical trial results, and it is in the process of making a submission to the US Food and Drug Administration to commence phase three.
The drug is already available to a small group of osteoarthritis patients in Australia who have failed all other forms of treatment, and has permission already from the FDA to run a trial with 10 subjects – largely former NFL players who have severe symptoms. Ultimately, Mr Rennie wants PPS to become the standard of care for all 100 million sufferers globally.
"We hope to start phase three trials in the first or second quarter of calendar year 2020," he said. "Re-purposing a drug lets us move through the process much faster than if it was a drug never used in humans before. This has been around for 70 years already."
Mr Rennie said the company had started to bring on more institutions to its register, but none were significant holders yet.
He said there had been a change in perception of the sector in the past six to 12 months and fund managers were recognising the growth opportunities in the field, rather than seeing it as risky and difficult.
"We're going to see the next phase of Cochlears, CSLs and ResMeds emerge because we now have these innovative, well-prepared business cases that big pharma companies need to see."
PAR Price at posting:
$2.53 Sentiment: Buy Disclosure: Held
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