This week we've initiated coverage on SUDA (ASX: SUD), a Perth-based a drug delivery company focused on oral spray formulations of existing drugs.

Imagine these five things.  First, a small pharmaceutical company with a unique platform for reformulating billion-dollar drugs for oral delivery.  Second, that such delivery is not only safer but also much faster-acting.  Third, that the target markets are large, including patients suffering migraine, anxiety, erectile dysfunction, nausea and malaria.  Fourth, that a reformulated approval potentially involves months (not years) and costs a few (not hundreds of) millions.  Fifth, that the small pharma already has its first licensing deal with a top-20 global pharma, as well as two other recent deals.  Well, the small pharma is SUDA.  We value it at 9 cents per share base case and 25 cents per share optimistic case using a probability-weighted DCF approach. Our target price of 17 cents per share sits at around the mid-point of valuation range.

You can download a copy of NDF Research's initiation report on SUDA by clicking here or visiting ndfresearch.com. We commend the report to you. Note - the usual disclaimers apply - click here.

Next week is an important milestone in my life. NDF Research (ndfresearch.com), which was founded on Friday 27 May 2016 to provide commissioned equity research focused on ASX-listed Life Science companies, will be a year old. Looking back over the last 12 months I have a lot to be thankful for, particularly the support and encouragement of great people I had yet to meet on that fateful day. Thank you to all of you who have contributed in some way to making it happen, or just passed on a kind word. Starting NDF Research was not something I did easily or lightly. The biotech and medical devices game may be a risky one, particularly in Australia and New Zealand, and requires a high risk appetite on the part of its participants, but I had never personally had the confidence to put out the shingle until last year, when I was past the age when I figured most entrepreneurs do their first start.

Partly what gave me the courage was the story of what I regard as the greatest startup in history, which took place in what is now the Startup Nation - the State of Israel - a long time ago. The startup I'm thinking of was, in effect, a spin out from the local building and fishing industry, and happened when a Great Man approached a couple of guys who had no experience in the field proposed for the new venture. The Great Man, aged about 30, said, simply, 'Follow Me'. That was a calling I have heeded myself, albeit imperfectly. We sometimes call the founder of the world's greatest startup the Great Physician, so I guess you could say His work was the forerunner of today's biotech and medical device industry.

Startups are perilous things. When the second-greatest startup in history was kicked off in Philadelphia in more recent years, the press release announcing it concluded with these these ominous words: 'We mutually pledge to each other our lives, our fortunes, and our sacred honour'. The 56 co-founders of that start - it attracted venture capital from 13 different jurisdictions, hence the high early headcount - knew that if they didn't get enough market share with their new venture it would not only fail but they would not be allowed to start another one. Their average age at the time was 44, which is comforting to this 46-year old entrepreneur. Thank heavens they succeeded.

Startups also tend to look a little messy at the beginning before they gain some traction. The third greatest startup in history was mostly staffed at the beginning by unskilled convicted criminals, many of whom had mental health issues and many of whom unfortunately died on the job. The venture had to rely almost exclusively on meagre government grants to survive. Indeed, it didn't take off until its main business changed from government services to agriculture a couple of decades after the start, but today people will move thousands and thousands of miles just to join this company. I was born into it. It's called Australia, and NDF Research, which I hope will go down in history as another great startup, is a recent spin-out company.

I will be in New Zealand all next week helping to build the Life Sciences sector of that great neighbour of Australia's. However the week after next, on around Monday 29 May, I intend to have a celebratory lunch for NDF's first birthday. If you'll be in downtown Sydney that day, just message me and I'll let you know the venue.
​
Stuart Roberts,
Founder and Senior Analyst,
NDF Research.

Nisi Dominus Frustra.

Today we've published our evaluation report on Phylogica (ASX: PYC), a Perth-based biotechnology company focused on peptide drug development.

Peptides are potentially very valuable as the basis for future world-leading drugs, and Phylogica has a powerful discovery engine with its Phylomer platform.  Most importantly, having discovered how peptide drugs can be delivered intra-cellularly, the company is able to address hitherto ‘undruggable’ targets.  This should in turn open the way for a pipeline of potential blockbuster drugs.  The company has already signed collaboration agreements with AstraZeneca, Roche, Pfizer and J&J.  In due course, each of these can yield substantial milestone payments (one such already received).  In addition to the outsourced projects, the company also has its own three, highly-prospective, in-house programmes focused on cancer targets. Our report has been commissioned by Phylogica to provide a third-party valuation of the company. We value Phylogica at 5.2 cents per share base case and 14.2 cents per share optimistic case. We regard 10 cents per share as a reasonable mid-range valuation for Phylogica.

You can download a copy of NDF Research's evaluation report in Phylogica by clicking here. I commend the report to you. Note - the usual disclaimers apply - click here.

Yesterday we initiated coverage on Optisan Imaging (ASX: OIL), a Melbourne-based company which has historically been an important player in the field of surgical microscopes and which is now being resurrected after around nine years in the wilderness. We think it is a phoenix rising from the ashes.

Optiscan is a Phase III company currently capitalised at only ~A$36m. Later this year Optiscan's partner, Carl Zeiss Meditec AG, the German manufacturer of optical systems, is expected to gain FDA approval for a new rigid endomicroscope that was developed by Optiscan and on which the two companies have been collaborating since around 2007. As we explain in our report, we believe the forthcoming Zeiss product has the potential to become a new gold standard for brain tumour surgery by making current practice obsolete. We suggest the market has yet to fully discover the late-stage nature of the Optiscan story.

Optiscan is a world-leader in the field of live micro-imaging, where powerful microscopes are used to image internal organs at the cellular level in real time for surgery and during diagnostic procedures such as endoscopy. In the 1990s the company introduced one of the first fibre optic confocal microscopy devices, while its Pentax ISC-1000, FDA approved in late 2004, was the world’s first flexible endomicroscope. The commercialisation of this landmark instrument stalled in 2007 and 2008 due to a combination of factors - Pentax was taken over by Hoya not long before the Global Financial Crisis, which led to cancellation of all Pentax-originated research and development, leading in turn to the discontinuation of the Pentax ISC-1000. A decade later, Optiscan finally appears to be recovering from the Pentax setback.

Last year a new leadership team took office at Optiscan, focused on gaining commercial outcomes from the historic A$100m that has been invested in the company since the 1990s. Their recovery plan has focused to date on helping Zeiss deliver the new endomicroscope product. We see that product as well as the new Optiscan pipeline helping to re-rate Optiscan stock. We value Optiscan at 11 cents per share base case and 25 cents per share optimistic case. Our 17-cent target price sits at around the midpoint of our valuation range.

You can download a copy of NDF Research's first report on Optiscan by clicking here. I commend the report to you. Note - the usual disclaimers apply - click here.

Here's this afternoon's Livewire Markets posting - visit www.livewiremarkets.com. Livewire is Australia’s source of financial intelligence.

Days like today make me wish I was back in stockbroking because Sirtex's 'Trading Update' has created the kind of contrarian play I love. Thanks to slower SIR-Spheres sales, Sirtex's constant currency EBITDA in 1H17 will fall 9-16%. As I write Sirtex stock is down 41%, making people think the world's just ended for this company. I argue, by contrast, that nothing serious has gone wrong. Yes, you heard me right. Sirtex has cited increased competition for patients, a new drug approval for salvage metastatic colorectal cancer, and tighter reimbursement. None of these should really worry Sirtex management because once SIR-Spheres are used for more than salvage therapy, Sirtex's growth profile will be assured. We know from numerous small studies that the product works in liver cancer. That's started to be borne out in the larger studies Sirtex has designed to move SIR-Spheres from 'last line' to first line', which is where the big money is. We at NDF Research don't cover Sirtex (yet), but I suggest investors taking a medium-term view may find a lot to be encouraged about.

​Note - the usual disclaimers apply - click here.

​176 Life Science patents (classification A61K) were issued by the US Patent and Trademark Office on Tuesday 18 October 2016 (click here). None went to Australian but one was granted to a New Zealand assignee.

ManukaMed, a company based at Masterton in the Wellington region, has been granted US Patent 9,469,675 for Anti-inflammatory proteins and methods of preparation and use thereof, which covers  a modified version of the honey glycoprotein apalbumin with greater anti-inflammatory properties than an unmodified apalbumin. The protein comes from Manuka honey, that is, honey from the Manuka tree (Leptospermum scoparium) native to New Zealand.

Manuka honey is one of the reasons that we argue New Zealand is on the cusp of a biotech and medical devices boom. To undestand what we mean check out out recent article headlined '100% Bullish on the New Zealand Life Science sector'.

​Over the last twelve months the Australian Life Science sector has been granted 114 US patents, versus 134 in the previous corresponding period. ​​In New Zealand over the last twelve months the Life Science sector has been granted 16 US patents, versus 12 in the previous corresponding period.

To look at US Life Science patent issuance since the beginning of 2014 to Australian assignees, click here. For  US Life Science patent issuance to New Zealand assignees click here.

Two new PCT patent applications relevant to the Australian and New Zealand Life Sciences sector published this week:

• WO/2016/161477, from Prince Henry's Institute of Medical Research in Melbourne, has been published for A method of treating neoplasias. This application covers the combination of antagonists to GDF-11, a myostatin-homologous protein, and activin A, a member of the transforming growth factor-beta superfamily, in sensitising tumours to chemotherapy.
  
• WO/2016/163894, from the Christchurch-based Cropmark Seeds, has been published for Control of parasitic infection in animals. This application covers grasses that have been infected with endophytes where the grass contains loline alkaloids, useful in treating internal infection by parasites in sheep.
  

To look at Life Science PCT patent applications by Australian and New Zealand applicants since the beginning of 2014 click here.

199 Life Science patents (classification A61K) were issued by the US Patent and Trademark Office on Tuesday 11 October 2016 (click here). None, however, went to either Australian or New Zealand assignees.

​Over the last twelve months the Australian Life Science sector has been granted 120 US patents, versus 129 in the previous corresponding period. ​​In New Zealand over the last twelve months the Life Science sector has been granted 15 US patents, versus 12 in the previous corresponding period.

To look at US Life Science patent issuance since the beginning of 2014 to Australian assignees, click here. For  US Life Science patent issuance to New Zealand assignees click here.

For a while now I have been telling anyone who'll listen that New Zealand is on the cusp of a biotech and medtech boom. As a matter of fact, I am so bullish about New Zealand as a Life Sciences investment destination that I have thought seriously about moving there for a while. This morning I've published an essay in which I share what's great about New Zealand before explaining why investors stand to make a lot of money over the next few years backing New Zealand's bio-entrepreneurs.​ 

This is the country that created Fisher & Paykel Healthcare as well as the A2 Milk Company, and, as Xero has shown us, is pretty good at technology. New Zealand has tended to lag Australia and other leading Life Science powers such as the US, the UK and Germany in terms of capitalising on its inherent Life Science potential, but I argue that that is about to change, because the pool of venture capital is getting bigger. In the meantime there are a number of interesting Life Science companies from New Zealand traded on ASX worth looking at. Both Innate Immunotherapeutics and Living Cell Technologies will read out important Phase II data probably in the next 12-18 months. Meanwhile AFT Pharmaceuticals has big growth plans for the next two years. And Volpara Health Technologies is rapidly growing its user base.

 For my analysis of New Zealand and the Life Sciences, click here.

280 Life Science patents (classification A61K) were issued by the US Patent and Trademark Office on Tuesday 4 October 2016 (click here). Three went to Australian assignees.

US Patent 9,458,093 went to Vectus Biosystems (ASX: VBS) for ​Compositions for the treatment of hypertension and/or fibrosis​​. This patent covers the use of vasoactive intestinal peptide (VIP) fragment in these two conditions.   

US Patent 9,457,107 went to the  ​University of Melbourne for Cage amine ligands for metallo-radiopharmaceuticals. This patent covers metal-binding organic compounds that could be useful in radiotherapy.

US Patent 9,457,062 went to Invion (ASX: IVX) for Chaperonin 10-induced immunomodulation. This patent covers chaperonin 10 polypeptides, useful for activating Toll-Like Receptors.

​Over the last twelve months the Australian Life Science sector has been granted 123 US patents, versus 129 in the previous corresponding period. ​

To look at US Life Science patent issuance since the beginning of 2014 to Australian assignees, click here. For  US Life Science patent issuance to New Zealand assignees click here.