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4 promising biotechs for 2018

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Biotech is definitely an area where Australia operates at a world-class level with the expertise of its medical researchers.

Australia has generated some major biotech success stories. Prime among these are Gardasil, the vaccine against the human papillomavirus (HPV) and thus, cervical cancer, which came out of the work of Jian Zhou and Ian Frazer at the University of Queensland, and was commercialised by CSL; and the influenza treatment, Zanamivir, developed at the CSIRO, in collaboration with the Victorian College of Pharmacy and Monash University.

CSL – the former Commonwealth Serum Laboratories – has become a global biotech leader, the world’s largest maker of plasma-based therapies, and a major player in vaccines.

But the path from laboratory discovery to major global drug is fraught with difficulty – and for investors, can be the boulevard of broken dreams. At any time, news flow – in the form of trial results, or partnerships with bigger companies – can send prices falling, or surging. It is a high-risk, high-reward sector of the stock market.

Here are four promising biotechs to keep an eye on this year. Like many of their ilk, these four companies do not make profits at present. But their intellectual property, partnership deals and commercialisation results are definitely catching the attention of the global biotech market.

 

Immutep (IMM:ASX)

Market capitalisation: $52 million

5-year return: –24.4% a year

Source: nabtrade

Immutep – named with a nod to the Egyptian god of medicine, Imhotep – works in immuno-oncology, which is the field of developing immune-based therapies that enable the body’s immune system to selectively recognise and attack cancer cells. The company is the former Prima BioMed, an immuno-therapeutics developer that in 2015 reported what looked to be promising results for its lead product, the CVac cancer vaccine – which had come out of research programs at Melbourne’s Austin Hospital – in an ovarian cancer trial.

However, the company changed focus after buying French biotech Immutep in late 2014 for US$25 million, and in May 2016 it sold the CVac assets to another company, Sydys, and shifted its strategic priority to the LAG-3 molecule, which came with the Immutep acquisition. The founder of Immutep, French immunologist Frédéric Triebel, discovered LAG-3 (lymphocyte activation gene 3) in 1990, while working at the Institut Gustave Roussy in France: Triebel is now chief medical officer and chief scientific officer of Immutep.

LAG-3 is an immune control mechanism that is considered one of the most promising targets in immuno-oncology. It is a protein molecule that can identify cancer cells to regulate immune responses, allowing patients to fight the disease using their own cells

The rationale for shelving the CVac work to concentrate on LAG-3 was to move from having a single cancer vaccine to a multi-product portfolio in this exciting field of immunotherapy. IMM now has four LAG-3 product candidates under development:

  • IMP321 (Eftilagimod Alpha, or “Efti” for short) is the most advanced candidate: it is currently in Phase 2b clinical trials for treatment of metastatic breast cancer as a combination therapy with paclitaxel (immunogenic chemotherapy): the role of Efti here is to work in conjunction with other therapies to amplify a patient’s immune response. This trial, being conducted in Europe, is pivotal: it is the most advanced clinical trial for a prospective immunotherapy drug related to LAG-3, and could address an unmet need in the large breast cancer treatment market, valued at US$17.2 billion ($22 billion), by 2021. Immutep recently began discussion with the US Food & Drug Administration (FDA) on an investigational new drug (IND) application for a regulatory pathway for the development of Efti in the United States: the company intends to file an IND in the first half of calendar year 2018. IMP321 is also in an Australian Phase I clinical trial in metastatic melanoma.
  • IMP 701 – Novartis holds exclusive rights to IMP701, an antibody that acts to stimulate T cell proliferation in cancer patients. The Novartis deal has so far triggered two milestone payments.
  • IMP731 – GlaxoSmith Kline holds exclusive rights to IMP731, an antibody that could remove T cells involved in auto-immune diseases.
  • IMP761 – an early-stage product candidate, also for the treatment of auto-immune diseases.

Immutep is at the forefront of the approach of harnessing the immune system’s abilities as the future frontier of cancer treatment, with a particular focus on combination therapies. Major global pharmaceutical companies are backing LAG-3 as a meaningful therapeutic target, leaving IMM nicely positioned as the intellectual property owner.

 

PharmAust (PAA:ASX)

Market capitalisation: $11 million

5-year return: –15.2% a year

Source: nabtrade

PharmAust is a clinical-stage company developing targeted cancer therapeutics to address both human and animal healthcare needs. The company specialises in repurposing marketed drugs, which lowers both the risks and costs of development. PAA also has a wholly owned subsidiary, Epichem, which is a highly successful contract medicinal chemistry company, which generates significant annual revenue.

In December, PharmAust announced highly promising results from tests conducted on dogs suffering from B-cell lymphoma – the most commonly treated canine cancer – who were given PAA’s development drug Monepantel (MPL), which stabilised the spread of the disease in the animals, by modulating the mTOR (mechanistic target of rapamycin) pathway, a major driver of cancer, active in many forms of the disease.

MPL is a repurposed drug that is already approved for veterinary use: PharmAust has patented it as a novel anti-cancer drug, and is developing it as a potentially safe treatment to stabilise cancer, negating the need for chemotherapy over a period of time.

The company said six of the seven dogs that had been diagnosed with B-cell lymphoma, and that received MPL for two weeks, did not experience a significant deterioration in their condition, despite suffering a highly progressive form of cancer. There was a 4% median reduction in tumour size among the dogs, and only one deteriorated in condition during the pilot study. No significant toxic side effects were seen.

PharmAust will now proceed to Phase 1 clinical trials – firstly with dogs, and then for humans – in 2018. For MPL to be officially categorised as a regressive cancer drug, able to be used to treat human as well as veterinary cancers, it would need to achieve a 20% reduction in tumour size. But the company was greatly encouraged by the results produced in just two weeks of treatment, and intends to put MPL through trials that could potentially indicate its possible use as a developing first-line cancer therapy.

PharmAust’s subsidiary, the Perth-based Epichem, is a contract manufacturer of synthetic drugs, which has been supplying the global drug discovery and pharmaceutical industries in 35 countries worldwide, for more than 12 years. Last year, Epichem expanded its capacity by 50% to meet increasing demand. Epichem won the ‘Western Australian Exporter of the Year’ award in 2017, and was a finalist in the Australian Export Awards. PAA forecasts revenue of approximately $4 million for Epichem in FY 2018, which would represent an annual growth rate of almost 25%.

 

Phosphagenics (POH:ASX)

Market capitalisation: $30 million

5-year return: –31.9% a year

Source: nabtrade

Phosphagenics is developing and commercialising innovative human and animal health products using a drug delivery system it invented, called TPM – which stands for both ‘targeted penetration matrix’ and ‘trocopheryl phosphate mixture.’ TPM is a chemical modification of Vitamin E, which can be formulated into gel, patch, cream or spray applications. TPM has been shown to improve delivery of active drugs, both small and large molecules, while reducing potential side effects. TPM is used in both human – both pharmaceutical and consumer care – and animal health markets.

Phosphagenics’ most advanced marketed product is TPM-Diclofenac gel, which is now licensed in 21 countries, through Novartis and Themis Medicare. The Vital ET biofunctional ingredient marketed by Ashland – used in the pre-treatment/skin health phase for products to treat acne – has been going since 2003: Phosphagenics manufactures Vital ET at its manufacturing plant in Australia, while Ashland distributes the product into the North American, European, Asian and South American markets.

In August, Phosphagenics signed a partnership with Terumo, one of Japan’s largest healthcare companies, for a R&D/commercialisation support deal for using TPM with the opiate painkiller Oxymorphone. Phase 1 clinical trials are expected to be activated by August 2018.

Phosphagenics’ consumer personal care and protection business works with global skincare brands: the company selects the most powerful active ingredients available to the skincare industry, and then delivers them into the skin to where they are needed most, using the TPM delivery technology. Phosphagenics’ scientists have developed a range of breakthrough anti-aging, anti-cellulite, anti-stretchmark products, which it licenses to major consumer health companies. The company says the consumer personal care and protection business is generating positive cashflow.

 

Mesoblast (MSB:ASX)

Market capitalisation: $695 million

5-year return: –22.3% a year

Source: nabtrade

Regenerative medicine company Mesoblast has developed a technology platform based on specialised cells called mesenchymal lineage adult stem cells (MLCs): these cells can be sourced from the bone marrow of young healthy adult donors and administered to thousands of patients, without any material immune response.

Mesoblast has three lead product candidates in active Phase 3 clinical studies:

  • MPC-150-IM, for chronic heart failure;
  • MPC-06-ID, for chronic low back pain due to disc degeneration; and
  • MSC-100-IV, for acute graft-versus-host disease, a major problem in transplants.

It also has MPC-300-IV, for biologic refractory rheumatoid arthritis and diabetic nephropathy, at Phase 2 trial stage.

Most advanced is the MPC-150-IM therapy, which aims to mitigate advanced heart failure, a progressive condition in which the heart cannot pump enough blood to efficiently serve the body. The company believes the therapy reduces inflammation, increases blood flow and spurs blood vessel formation that helps repair the heart muscle. A single dose consists of 150 million highly purified stem cells delivered directly to the heart’s left ventricle, by injection or catheter.

Last month, Mesoblast announced that the US FDA would fast-track the review of MPC-150-IM under a new designation, the Regenerative Medicine Advanced Therapy (RMAT). The designation is based on the preliminary clinical trial data.

The company also expects the primary endpoint results from its Phase 3 trial of MSC-100-IV in paediatric acute graft-versus-host disease in the current quarter.

In December, Mesoblast signed a partnership with Belgian cell therapy company TiGenix for an exclusive global patent licence to commercialise its adipose-derived mesenchymal stem cell product Cx601, to be used for the treatment of fistulae. Mesoblast will receive up to €20 million ($30.6 million) in payments, with €5 million upfront, €5 million within 12 months and up to €10 million in product regulatory milestones.

Mesoblast capped a strong 2017 by being named by global market research firm Frost & Sullivan as the 2017 Global Technology Leader in the cell therapy industry. This effectively recognises Mesoblast as being one of the furthest advanced participants in the medical stem cell industry.

James Dunn is a regular finance commentator on Australian radio and television. This information was produced by Switzer Financial Group Pty Ltd (ABN 24 112 294 649), which is an Australian Financial Services Licensee (Licence No. 286 531). All prices and analysis at 8 January 2018. This article was first published on Switzer Report on 8 January 2018. This material is intended to provide general advice only. It has been prepared without having regarded to or taking into account any particular investor’s objectives, financial situation and/or needs. All investors should therefore consider the appropriateness of the advice, in light of their own objectives, financial situation and/or needs, before acting on the advice. This article does not reflect the views of nabtrade.