Oventus Medical (ASX: OVN) - Undisrupted sleep, disrupted billion dollar markets​

Report released: Wednesday 1 August 2018
Analyst: Stuart Roberts, stuart@ndfresearch.com, +61 447 247 909
Since the origin of CPAP in the early 1980s there have been treatment solutions for Obstructive Sleep Apnea, and these have created multi-billion-dollar companies such as ResMed. CPAP, however, while improving over time, is still relatively expensive and under-utilised thanks in part to patient discomfort, rendering it ineffective for many patients. Enter the simpler treatment modalities for mild and moderately affected patients, including mouthguard-like oral appliances, which have been growing in importance for the last 15 years. The race is now on for the optimal design of such a device, and a contender for the laurels is Oventus Medical with its O2Vent range. We believe that the ability of the newest O2Vent designs to interface with CPAP and EPAP provides a way to provide personalised treatment to get the best outcome for the individual patient in more than 80% of cases. We value Oventus at $0.52 base case and $1.46 optimistic case using a DCF-based approach. Our target price of $1.00 sits at the midpoint of our DCF range. We see Oventus being re-rated by increased sales and by further clinical data showing the superiority of the O2Vent ‘Sleep Treatment Platform’. 

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Phosphagenics (ASX: POH) - Returns coming from a >$100m investment

Report released: Monday 23 July 2018
Analyst: Stuart Roberts, stuart@ndfresearch.com, +61 447 247 909
Since the early 2000s Phosphagenics has spent more than A$100m on its drug reformulation technology called TPM®, built from Vitamin E. The company has ample pre-clinical and clinical data showing that TPM® is not only an effective transdermal drug delivery system, but it can also improve oral bioavailability as well as improve the solubility, stability and safety of injected drug formulations. The company has finished topical products sold by the pharmaceutical giant, Novartis, in India.  The company has developed and completed early clinical work on what could become the first patches for transdermal delivery of the opioid analgesics oxycodone and oxymorphone. It is in a global partnership with the Japanese medical device major Terumo, working on a new formulation of the anaesthetic drug propofol. In addition, it has significant potential for upside from an international arbitration with Mylan, expected to be decided soon. We value Phosphagenics at 5.6 cents per share base case and 11.7 cents optimistic case. Our target price of 9 cents sits at the midpoint of our valuation range. The current A$25.2m market capitalisation, in addition to markedly undervaluing the replacement value of TPM®, discounts the reasonable chance of commercial success for this company under its current leadership team.

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Invitrocue (ASX: IVQ) ​- The next step in predicting cancer treatment outcomes

Report released: Friday 20 April 2018
Analyst: Stuart Roberts, stuart@ndfresearch.com, +61 447 247 909
Invitrocue is a Singapore-based bioanalytics company with global operations in Australia, Asia and Europe. The company founded in 2012 to commercialise two technologies for 3D cell culture, HepatoCue and 3D CelluSponge. These technologies are used to develop in vitro liver models to improve toxicology testing. Invitrocue also offers a clinical service called Onco-PDO, a tool for selecting the right drugs from an in vitro model of a patient’s tumour. Invitrocue is leveraging on its expertise and know-how in 3D cell culture to grow patient-derived cancer cells in its scaffolds and other platforms to test them against a range of cancer therapies. With Onco-PDO, the way is open for low-cost personalised cancer medicine, where the market opportunity lies in the billions. We value Invitrocue at 7.3 cents base case and 24.4 cents per share optimistic case. Our target price of 16 cents per share sits at the midpoint of our valuation range. We see Invitrocue being re-rated by further data showing the power of Onco-PDO, and the commencement of clinical studies to validate Onco-PDO ahead of regulatory approval.

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Actinogen Medical (ASX: ACW) ​- Breaking the long dry spell in Alzheimer’s treatment

Report released: Tuesday 10 April 2018
Analyst: Stuart Roberts, stuart@ndfresearch.com, +61 447 247 909
Actinogen Medical is developing a new Alzheimer's drug. 20 years ago, a diagnosis of cancer was often considered a death sentence; today the majority of patients survive for more than five years through significant advances in diagnosis and treatment. 25 years ago, the first treatment for Alzheimer’s disease was brought to market; yet today the prognosis for Alzheimer’s disease has changed very little. The few drugs that are available provide only marginal benefit and the need for new effective therapies has never been more urgent. In the US alone, there are over 5 million Alzheimer’s sufferers, and in Australia, it’s the leading cause of death for women and second only to cardiovascular disease for men.  These current grim statistics are due in large part to the few approved treatments providing only symptomatic relief, and that there has not been a new FDA-approved Alzheimer’s treatment since 2003. Age is the biggest risk factor for Alzheimer’s and the aging population is resulting in more and more of our loved ones being diagnosed with the disease each year. The challenge is to develop new treatments that result in a shift in Alzheimer’s disease prognosis comparable to the substantial progress seen with cancer. The company that successfully brings a drug to market will have access to a global market in the tens of billions of dollars and the potential to create the next Alzheimer’s blockbuster. Actinogen Medical aspires to be part of that shift.  The company’s unique focus is on the development of Xanamem, a drug that targets cortisol (rather than amyloid plaques). This target has strong published scientific support indicating a promising chance of success.  Actinogen’s Phase 2 trial of Xanamem, entitled XanADu, is expected to complete in 2019. On this basis, we value the company at 10 cents per share base case and 26 cents per share optimistic case. Our target price of 18 cents per share sits at the midpoint of our valuation range. We see Actinogen being re-rated by the progress of the XanADu trial, particularly with an interim analysis due in May/June 2018 prior to the full results in the second quarter of 2019.

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Kazia Therapeutics (ASX: KZA) ​- Picking up where Genentech left off

Report released: Tuesday 3 April 2018
Analyst: Stuart Roberts, stuart@ndfresearch.com, +61 447 247 909
Kazia Therapeutics is a cancer drug developer. Glioblastoma is an acute brain cancer with, at the moment, limited treatment options.  As such, there’s a billion-dollar market opportunity waiting to be realised.  That is Kazia Therapeutics’ prime focus – and it recently commenced a Phase 2 trial of its small-molecule GDC-0084.  Back in 2016, notwithstanding positive Phase 1 results, Genentech offered this candidate for sale and Kazia was the successful bidder, attracted by the prospects for a successful inhibitor of the cellular signalling pathway PI3K.  There are others chasing this pathway and in 2014 Gilead obtained approval for Zydelig.  But unlike their drug, Kazia’s candidate is specifically focused on glioblastoma and has the advantage of a molecule that not only has an already-demonstrated Phase 1 safety record but, uniquely, has the ability to cross the blood-brain barrier.  If the recently initiated Phase 2 is successful, there may be accelerated approval for GDC-0084 given the paucity of current glioblastoma treatments.  In addition to GDC-0084, Kazia has an ovarian cancer drug (developed internally) that completes Phase 1 in 2018.  Kazia was formerly known as Novogen. The name change in late 2017 reflects the new lead compound and the arrival of a highly-experienced management team, led by Dr James Garner. We value Kazia at $0.73 per share base case and $3.50 per share optimistic case. Our target price of $2.10 per share sits at the midpoint of our valuation range. We see Kazia being re-rated by the progress into the clinic of GDC-0084. This note is our original note on Novogen from 7 November 2017, updated for what has happened since then.

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Orthocell (ASX: OCC) ​- Growing with CelGro®

Report released: Tuesday 20 March 2018
Analyst: Stuart Roberts, stuart@ndfresearch.com, +61 447 247 909
Orthocell is an emerging player in the multi-billion-dollar field of regenerative medicine.  Its unique foundation products (Ortho-ATI® for tendon repair and Ortho-ACI® for cartilage repair) provide early commercial opportunities with large addressable markets.  But, the big payday may occur this financial year with European approval (CE Mark) achieved for CelGro® and US approval to follow. CelGro® is the company’s collagen scaffold that facilitates rapid tissue regrowth across a range of indications.  We regard CelGro® as a potential breakthrough product due to its mechanical strength, natural collagen structure and versatility.  CelGro® could also enjoy rapid initial revenue in dental and orthopaedic markets - potentially accelerated by commercial partnerships with large healthcare companies.  CelGro®’s potential market is well in excess of US$2bn. Orthocell has further related and ground-breaking opportunities including its ‘Cell Factory’ project to harness stem cell growth factors.  Our target price for the company is A$1.75 per share (midpoint of base case: A$0.89 and optimistic case: A$2.63).

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Patrys (ASX: PAB) ​- Cell-penetrating monoclonal antibodies

Report released: Tuesday 19 December 2017
Analyst: Stuart Roberts, stuart@ndfresearch.com, +61 447 247 909
Patrys is developing a cell-penetrating monoclonal antibody. To understand this opportunity, you need to do two things at once.  Think micro: recognising that Patrys has a world-first, cell-penetrating anti-DNA antibody.  At the same time, think macro: recognising that its ground-breaking drug will play into a US$84bn antibody market.  Taken together, these ingredients have the feel of blockbuster potential.  The story started when Patrys in-licensed a ground-breaking antibody from Yale University in 2016.  One way that cancer cells stay alive is by self-repairing their DNA when it breaks – and Yale’s Deoxymab 3E10 prevents this.  Importantly, Patrys has now upgraded this antibody for human use.  And, on the basis of its pre-clinical work, it recently announced that its version (PAT-DX1) may have application for a broad range of cancers: glioblastoma, colon cancer, triple negative breast cancer; and possibly, melanoma and other cancers as well.  This product will enter the clinic in 2019.  Back in 2014, AstraZeneca gained FDA approval for Lynparza, the first of the revolutionary PARP inhibitor drugs for the treatment of cancer. For reasons explored further in this note, Patrys’ product could be superior since it can prevent double-strand as well as single-strand cancer DNA repair.  In addition, it can be synergistic with PARP inhibitors, and conjugated to other drugs of interest.  This antibody is Patrys’ current priority – but the company still retains (for possible future attention) the IP from its original work on creating a new class of monoclonal antibody drug.  We value Patrys at 7.3 cents per share base case and 18.3 cents optimistic case.  Our target price of 13 cents per share sits at the midpoint of our valuation range.  We see Patrys being re-rated by the progress into the clinic of PAT-DX1 and continued commercial success for the PARP inhibitors.

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SUDA (ASX: SUD) ​- Faster, safer delivery for ex-blockbusters​

Report released: Monday 14 August 2017
Analyst: Stuart Roberts, stuart@ndfresearch.com, +61 447 247 909
SUDA is 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.

​​Click here for our initiation report.

Cynata (ASX: CYP) ​- The Swiss Army Knife of cellular remedies​

Report released: Monday 24 July 2017
Analyst: Stuart Roberts, stuart@ndfresearch.com, +61 447 247 909
Cynata is a Melbourne-based regenerative medicine company.  Regenerative medicine is the future – and will create some billion-dollar companies.  Cynata is well placed for this race.  Its Cymerus technology uniquely produces vast quantities of Mesenchymal Stem Cells (MSCs) from a single blood donation.  This science, originated by Prof. Igor Slukvin at the world-leading stem-cell labs of the University of Wisconsin-Madison, is exclusively licensed to Cynata.  MSCs have wide application: heart repair, rebuilding bones and cartilage, reducing inflammation and much more.  For example, in early 2017 (with backing from Britain’s NHS), Cynata initiated a UK-based Phase 1 trial in steroid-refractory acute Graft vs Host Disease (GvHD).  Happily, international majors are noticing Cynata’s ground-breaking progress.  In January of this year, Fujifilm (now a global leader in cellular medicine) initiated a strategic partnership with Cynata and optioned the GvHD indication in a deal with upfront, milestone and royalty payments.  The company also made a $4m equity investment in Cynata.  The future is on the way.  Our target of $2.00 per share sits at around the mid-point of our probability-weighted valuation range of $1.03 per share base case and $2.77 per share optimistic case.

​​Click here for our initiation report.

Phylogica (ASX: PYC) ​- In good company

Report released: Monday 1 May 2017
Analyst: Stuart Roberts, stuart@ndfresearch.com, +61 447 247 909
Phylogica is 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. This 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.

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Optiscan Imaging (ASX: OIL) ​- Phoenix from the ashes

Report released: Tuesday 18 April 2017
Analyst: Stuart Roberts, stuart@ndfresearch.com, +61 447 247 909
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.  Ten years later, we see the phoenix rising from the ashes. 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. With the support of Carl Zeiss Meditec AG, the German manufacturer of optical systems, Optiscan is now nearing completion of its second-generation device specifically designed for neurosurgery, which has the potential to become a new gold standard for brain tumour surgery by making current practice obsolete. We expect this device will gain FDA approval later this year. We see the new product and the new Optiscan pipeline as helping to re-rate the 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.

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Anatara Lifesciences (ASX: ANR) ​- A good gut feeling

Report released: Monday 23 January 2017
Analyst: Stuart Roberts, stuart@ndfresearch.com, +61 447 247 909
Anatara Lifesciences is striking a blow against antibiotic resistance. The company is nearing the market with its first product, called Detach, a treatment for production animals such as cattle and pigs designed to reduce gastrointestinal disorders in these animals, thereby increasing meat yield. Anatara filed for Australian approval of Detach in October 2016 and expects to be selling the product commercially to pig farmers in 2017. We see significant upside for Anatara from an option granted last year to the animal health major Zoetis over a worldwide license for Detach’s use in production animals. Anatara has argued that Detach’s mechanism of action, which doesn’t involve killing pathogens directly, makes the product one potential solution to the emerging problem of antibiotic resistance. Anatara is currently looking at human applications for Detach, where the market opportunity in Inflammatory Bowel Disease and other gastrointestinal diseases in need of new anti-inflammatory approaches is significant. We value Anatara at $2.22 base case and $5.94 optimistic case using a DCF approach. Our target price of $4.00 sits at around the midpoint of our valuation range. 

​Click here for our initiation report.

Alcidion (ASX: ALC) ​- Making hospitals smarter with Clinical Decision Support

Report released: Friday 16 December 2016
Analyst: Stuart Roberts, stuart@ndfresearch.com, +61 447 247 909
Alcidion is an emerging player in health informatics. Medical error is now the third leading cause of death in the US. Alcidion, an emerging player in the US$100bn field of health informatics, has technology that can help reduce these deaths while making hospitals much more efficient. Alcidion stock has more than doubled since it listed on the ASX in late February, a re-rating driven primarily by commercial progress in various Australian hospitals. In this note we argue that the market continues to undervalue Alcidion, given the significant investments now going into health informatics and Clinical Decision Support Systems around the world, and the unique nature of Alcidion’s platform, which by markedly improving the quality of hospital care is attracting new users. We value Alcidion at 12.2 cents per share base case and 26.3 cents per share optimistic case using a DCF approach. Our target price of 20 cents per share sits at the midpoint of our valuation range. We see various contract wins in Australia and New Zealand, and the beginning of US commercial interest, as driving a continued re-rating

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Resonance Health (ASX: RHT) ​- World-leading MRI diagnostics

Report released: Thursday 1 December 2016
Analyst: Stuart Roberts, stuart@ndfresearch.com, +61 447 247 909
Resonance Health develops new MRI diagnostics. Resonance Health was originally built around FerriScan, an MRI test for iron overload disorders. That diagnostic has consistently made money for Resonance since its FDA approval in 2005. In recent years, however, Resonance has been positioning itself for the coming boom in drugs that treat liver disorders. Its new HepaFat-Scan, another MRI test, was FDA approved in 2013 and can reasonably be expected to play a role in managing diseases such as Non-Alcoholic Fatty Liver Disease (NAFLD). This disease affects 20-30% of the Western world’s population and is a multi-billion-dollar market opportunity. Beyond FerriScan and HepaFat-Scan, Resonance has new MRI-based diagnostics in development. These should further entrench its technological lead. We value Resonance at 7.5 cents per share base case and 14.3 cents per share optimistic case. Our target price of 11 cents per share sits at the midpoint of our DCF range.​

​Click here for our initiation report.

AdAlta (ASX: 1AD) - ​Smaller, smarter antibody-like drugs

Report released: Tuesday 13 September 2016
Analyst: Stuart Roberts, stuart@ndfresearch.com, +61 447 247 909
​AdAlta is developing an antibody-like drug called the i-body with the same target specificity and affinity as a monoclonal antibody, but about 90% smaller. Monoclonal antibodies are a workhorse of modern medicine with global sales of >$US70bn pa.  But they are expensive to make and their molecule size makes them too big for use against many important drug targets. They also require heavy dosing and this must be delivered by intravenous infusion.  AdAlta is developing an antibody-like drug called the i-body with the same target specificity and affinity as a monoclonal antibody, but about 90% smaller.  It will also more likely be cheaper to make, easier to administer and capable of addressing difficult-to-treat diseases such as fibrosis. AdAlta’s first clinical product from its platform will be AD-114, initially for the treatment of Idiopathic Pulmonary Fibrosis. We see considerable upside for AdAlta given the high valuation that validated antibody and antibody-like platforms tend to trade for, the early focus on fibrosis and the demonstrated ability to hit targets that have proved extremely difficult to drug with antibodies, such as GPCRs. We value AdAlta at 38 cents per share base case and 89 cents optimistic case. Our target price of 60 cents per share sits around the midpoint of our DCF range.

​Click here for our initiation report.

​Dimerix (ASX: DXB) ​- Hitting the GPCR spot

Report released: Thursday 25 August 2016
Analyst: Stuart Roberts, stuart@ndfresearch.com, +61 447 247 909
Dimerix knows how to find some potentially really valuable drug targets. Its first product is an Orphan Drug in the kidney disease area. Dimerix is a Melbourne and Perth-based drug discovery company being built around new ways to identify G Protein-Coupled Receptors, the target of a significant number of present and former blockbuster drugs. Dimerix’s Receptor-Heteromer Investigation Technology (Receptor-HIT) allows druggable GPCR combinations to be identified. Dimerix’s lead DMX-200 candidate, a combination of two existing drugs, irbesartan and propagermanium, is now in a Phase II study in patients with proteinuria, which is symptomatic of a range of kidney problems. Following recent guidance for the FDA, Dimerix is now making plans to take DMX-200 into a pivotal study in Focal Segmental Glomerulosclerosis, an Orphan kidney disease. We value Dimerix at 2.4 cents per share base case and 5.9 cents per share optimistic case. Our target price of 4.0 cents per share sits at the midpoint of our DCF range.

​Click here for our initiation report.

ResApp Health (ASX: RAP)  ​- The Next Big Thing in Respiratory Diagnostics

Report released: Monday 25 July 2016
Analyst: Stuart Roberts, stuart@ndfresearch.com, +61 447 247 909
ResApp Health is a Perth-based company developing a smartphone-based diagnostic for respiratory disease. The technology, originally developed at the University of Queensland, can detect, through the measurement of coughs and breathing sounds, a range of respiratory disorders including pneumonia, asthma, and COPD with sensitivities and specificities greater than 90% and improving all the time thanks to machine learning. The technology works on existing smartphones with no extra specialised hardware required, making rapid deployment post-regulatory approval a relatively straightforward and highly scalable proposition. ResApp Health is now preparing for a registration study of the technology, ahead of a filing for FDA approval expected in early 2017.

​Click here for our initiation report.
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