Interactive Investor

Six AIM pharma shares on verge of breakthrough

2nd February 2018 16:06

Andrew Hore from interactive investor

Loading

Share on

Last week, I wrote about companies that have disappointed in recent times, but have potential to bounce back this year. This week covers health and pharma companies that may have been taking years to develop a product or technology and they could be finally on the verge of benefiting from that past investment.

These are six companies that are near to launching a product, have important trial results on the horizon or are finally set to grow revenues from their products.

Genedrive (GDR)

34p

Molecular diagnostics developer Genedrive is typical of a pharma/healthcare business in that it takes many years to develop and prove a new product. In this case, the product is the Genedrive molecular diagnostic testing platform, which has received the CE Mark for the hepatitis C and tuberculosis assays.

The commercialisation of the Genedrive point of care tests is initially coming through two agreements with Sysmex, which covers EMEA and Asia Pacific, excluding India. The field study in Africa for the hepatitis C assay has been a success. It was faster and lower maintenance than the main rival. The first sales of this assay will be in the second half.

The services business is non-core and the uncertainty of ownership has held back revenues. That is why there was a decline in first half group sales from £2.88 million to £2.6 million. Losses are expected to continue for the foreseeable future, but they should reduce.

There was £4.6 million in the bank at the end of 2017 with the potential to raise up to £2 million if the services business is sold. This provides a strong financial base and if Genedrive can demonstrate that sales are coming through then investors will take note.

Byotrol (BYOT)

3.45p

Byotrol has developed its own anti-microbial technology, which has many potential uses. However, it has taken a long time for Byotrol to get any commercial traction and revenues remain low - 2017-18 revenues of £3.5 million are forecast.

That is not a lot considering Byotrol has been quoted for well over 12 years. The original placing price was 23p. Like many companies of this type the share price more than trebled in the early years when investors got excited by the technology, but it has consistently drifted downwards in recent years on the back of impatience with the progress made.

Byotrol splits its business into professional, consumer and pet care. Consumer is the smallest part of the business in terms of revenues and it was the only one to grow its revenues in the first half - although its revenues can tend to be volatile with a large milestone payment in the second half of last year. Byotrol is completing approvals in the US for an anti-microbial trigger spray and trials with US retailers could start by the summer.

The professional division has yet to see the benefits of the rebranding of NHS-focused hand sanitisers as Invirtu.

Byotrol has signed up Solvay and other significant businesses as licensees and partners and more are on the way. It is important these deals start to generate greater revenues from markets that are worth hundreds of millions of pounds.

A fundraising at 4p a share (higher than the current share price) during the summer of 2017 improved Byotrol's balance sheet with cash of £4.8 million at the end of September 2017. This means that management can focus on building up revenues and next year revenues are expected to almost double to £6.6 million, thereby moving the company into profit.

The shares would be trading on 17 times prospective earnings, falling to seven in 2019-20 if it can achieve its targets.

Angle (AGL)

49.5p

Angle has been reporting extremely positive study results for its Parsortix device that harvests circulating tumours. These come from some of the highest ranked research institutes in the world. The studies have also found additional ways that the technology can be used to gain further information on cancers and the progress of their treatment.

Angle bought Axela to add analysis to the product offering. Axela's Ziplex technology can analyse genetic and protein biomarkers and provide specific information about a tumour. Angle paid £3.7 million for technology that has cost £20 million to develop. According to broker finnCap, by providing the additional services in the liquid biopsy Angle could increase its revenues per test from $130 to $350.

Last year's placing at 35p a share raised £12.2 million to fund the acquisition and finance clinical studies and the FDA application for Parsortix. It should be noted that the recent first half balance sheet to October 2017 did not include the cash from the fundraising. The cash should last well into the 2018-19 financial year, but more cash will be required, possibly from partnering deals, before the business becomes cash generative.

The key is likely to be the metastatic breast cancer study, covering 400 patients, which should be completed in the second half of 2018. If this provides positive results, then it will be an important step towards FDA clearance in 2019. It is also likely to provide momentum for the share price.

Motif Bio (MTFB)

37.55p

Antibiotics developer Motif Bio is reaching an important point in the development of its new antibiotic Iclaprim, which is focused on acute bacterial skin and skin structure infections (ABSSSI). Antibiotic resistance is a key topic in the healthcare sector so new antibiotics are essential.

Iclaprim was originally discovered by Hoffman-La Roche, but Motif has adapted the development programme to address the reasons it failed to gain FDA approval in 2009.

Iclaprim has shown that it is at least as good as existing antibiotics in treating skin infections, but without the side effects of the rivals. It can be used on very sick patients.

The plan is to lodge a new drug application in the US during the first quarter of 2018. If things go smoothly, then there could be a commercial treatment by the end of 2018.

Motif has secured a $20 million loan facility, which more than doubled the available cash. A shelf registration in the US will enable Motif, which is also listed on Nasdaq, to raise up to $80m over a three-year period, although it says that no fundraising is currently planned.

The US hospital market will be targeted via a contract sales organisation, while in Europe a partner will be sought and they will provide milestone payments to help to finance the approvals process in the region.

Moving towards approvals that confirm that Iclaprim is a commercial product should propel the share price upwards.

Avacta (AVCT)

65p

Avacta's core business is the development of Affimers, which are engineered alternatives to antibodies, and the company owns the rights to the technology. Affimers are based on natural proteins that are adapted to behave like an antibody and they are much easier to make and easier to modify than antibodies.

If Avacta can show that Affimers are a commercial and viable alternative then the potential is enormous. The drug discovery and diagnostics markets are worth billions of pounds and Affimers could become an important component in these markets. The main potential markets are reagents and therapeutics.

Avacta has already invested around £30 million in the Affimers business. Many companies are evaluating Affimers and this will lead to further deals. Each evaluation can generate £25,000-£50,000 in income for Avacta and help to validate the technology.

Cash is not a worry, at the moment, because there was £13.2 million in the bank at the end of July 2017. The cash burn of the business is more than £500,000 a month and will increase.

The latest collaboration is with OncoSec, which is investigating the potential to inject Affimers directly into tumours.

Immupharma (IMM)

129p

Immupharma is set to reveal results from a phase III study for the use of Lupuzor in the treatment of lupus by the end of the first quarter of 2018. If this is positive, then Immupharma will be able to focus on finding a partner to commercialise the treatment, as well as making progress with approval by the FDA.

The 12-month, phase III trial has already shown that the drug has a good safety profile. Requests from staff and patients mean that a follow-up study of eligible patients from the phase III study will enable a further six months of treatment with Lupuzor.

A £10 million fundraising at 144p a share puts Immupharma in a strong financial position when talking to partners for Lupuzor as a lupus treatment and other autoimmune conditions. The cash will also be used to develop additional treatments using the Lupuzor platform.

Positive trial results will significantly increase the upside for Lupuzor and Immupharma itself.

ii publishes information and ideas which are of interest to investors. Any recommendation made in this article is based on the views of the writer, which do not take into account your circumstances. This is not a personal recommendation. If you are in any doubt as to the action you should take, please consult an authorised investment adviser. ii do not, under any circumstances, accept liability for losses suffered by readers as a result of their investment decisions.

The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest.

Disclosure

We use a combination of fundamental and technical analysis in forming our view as to the valuation and prospects of an investment. Where relevant we have set out those particular matters we think are important in the above article, but further detail can be found here.

Please note that our article on this investment should not be considered to be a regular publication.

Details of all recommendations issued by ii during the previous 12-month period can be found here.

ii adheres to a strict code of conduct. Members of ii staff may hold shares in companies included in these portfolios, which could create a conflict of interests. Any member of staff intending to write about any financial instruments in which they have an interest are required to disclose such interest to ii and in the article itself. We will at all times consider whether such interest impairs the objectivity of the recommendation.

In addition, staff involved in the production of investment articles are subject to a personal account dealing restriction, which prevents them from placing a transaction in the specified instrument(s) for a period before and for five working days after such publication. This is to avoid personal interests conflicting with the interests of the recipients of those investment articles.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

Disclosure

We use a combination of fundamental and technical analysis in forming our view as to the valuation and prospects of an investment. Where relevant we have set out those particular matters we think are important in the above article, but further detail can be found here.

Please note that our article on this investment should not be considered to be a regular publication.

Details of all recommendations issued by ii during the previous 12-month period can be found here.

ii adheres to a strict code of conduct.  Contributors may hold shares or have other interests in companies included in these portfolios, which could create a conflict of interests. Contributors intending to write about any financial instruments in which they have an interest are required to disclose such interest to ii and in the article itself. ii will at all times consider whether such interest impairs the objectivity of the recommendation.

In addition, individuals involved in the production of investment articles are subject to a personal account dealing restriction, which prevents them from placing a transaction in the specified instrument(s) for a period before and for five working days after such publication. This is to avoid personal interests conflicting with the interests of the recipients of those investment articles.

Get more news and expert articles direct to your inbox

Sign up for a free research account to get the latest news and discussion, and create your own virtual portfolio.

Free Sign Up