Australia’s biotech reputation – in both potential drugs and in diagnostic devices – is deservedly high. Here are three of my favourite potential biotech stars on the ASX.
LBT Innovations (LBT, 14 cents)
Market capitalisation: $21 million
Analysts’ consensus price target: n/a
I liked the look of LBT Innovations in July last year (at 25.5 cents): I like the look of it even more now, at 14 cents. The Adelaide-based LBT has a track record of international commercial success with its first product, the MicroStreak technology, which automates the preparation of biological samples onto agar plates for laboratory testing, helping both to standardise the testing process and make it more efficient: now it’s poised to launch its second major product, APAS Independence.
Standing for ‘automated plate assessment system,’ the APAS Independence technology uses artificial intelligence (AI) and machine learning to automatically analyse and interpret growth on microbiology culture plates, enabling faster and more efficient diagnosis and reporting of infectious diseases.
APAS Independence, which is a joint venture between LBT Innovations and Swiss company Clever Culture Systems, has been approved by US and Australian regulators – it was approved by the US Food and Drug Administration (FDA) in 2016 as a Class II medical device – and LBT says tests have shown it to be more accurate than reviews of culture plates by individual microbiologists. In November last year, St Vincent’s Hospital in Melbourne completed the first customer evaluation of APAS Independence, which confirmed that the instrument works, is easy for technicians to use and met its performance and efficiency targets in a real-life clinical setting.
About the size of a large photo-copier, the APAS Independence machine uses military-grade visual recognition analysis to detect colony growth on agar plates, number the colony types identified and apply AI rules to sort each plate for further processing. In microbiology labs, agar plates are the most commonly used diagnostic tool. However, analysis of the plates is time and resource-intensive – microbiologists currently have to look at each agar plate individually despite, on average, 95% of them being negative. LBT says the APAS machine can scan and interpret 200 plates an hour and assess them more accurately than microbiologists can.
LBT has also developed a product called WoundVue, a hand-held portable device that takes 2D and 3D images of chronic wounds to objectively monitor wound healing, from the APAS technology platform. The company has struck a joint venture – called Clever Culture Systems AG (CCS) – with Swiss global lab instrumentation company Hettich, to commercialise and distribute the APAS system.
LBT is comfortably funded: last month, it raised $7 million through a share placement to institutional and ‘sophisticated’ investors, which it will use to support the commercial launch of the technology. That comes on top of $4 million in funding LBT got from the South Australian government in February, as part of a jobs and innovation initiative. From here, it’s all about leveraging the successful clinical evaluation at St. Vincent’s Hospital by publishing the relevant data, signing up with distribution partners and establishing customer reference labs, and then full commercial launch of APAS – expected this year.
Opthea (OPT, 53 cents)
Market capitalisation: $107 million
Analysts’ consensus price target: $1.293 (Thomson Reuters)
Circadian Technologies was one of Australia’s earliest biotechnology companies, listing on the Australian Stock Exchange in 1985. Circadian successfully launched and spun out several prominent biotechnology companies including Axon Instruments, Optiscan Imaging and Antisense Therapeutics. In the late 2000s Circadian started to focus on the intellectual property of its Vegenics subsidiary, which was based around the vascular endothelial growth factor (VEGF) family of proteins. The company changed its name to Opthea Limited in December 2015.
The company’s lead molecule, OPT-302, acts as a “trap” for two forms of VEGF, which play significant roles in several major eye diseases, including neo-vascular (or “wet”) age-related macular degeneration (wet AMD), which is the leading cause of blindness in the developed world. OPT-302 inhibits the blood and lymphatic vessel growth – and the vascular leakage – that are hallmarks of wet AMD.
Wet AMD is characterised by the loss of vision of the middle of the visual field caused by degeneration of the central portion of the retina (the macula). Abnormal growth of blood vessels below the retina, and the leakage of fluid and protein from the vessels, causes retinal degeneration and leads to severe and rapid loss of vision.
OPT-302 also appears to work in the same way against diabetic macular edema (DME), which is characterised by retinal thickening from leaky blood vessels: DME is the leading cause of blindness in diabetics, and is estimated to affect more than 2 million people around the world.
Last April, Opthea announced positive results from the Phase 1/2A clinical trial of OPT-302 against wet AMD, which was run under an investigational new drug IND) program with the FDA. The study met its primary safety endpoint – that is, the pre-determined measure considered success of the therapy being trialled – with OPT-302 well tolerated at all dose levels either alone or in combination with Lucentis (Roche’s and Novartis’ wet AMD drug, which is already on the market).
The reason the market – and specialist biotech institutional investors – got excited by this trial is that wet AMD is a major disease target, and is thus a potentially very lucrative market. In 2016, Lucentis sales were more than US$3.6 billion ($5 billion), while Eylea, a Regeneron/Bayer drug that treats wet AMD and several other eye diseases, sold even more, at US$5.4 billion ($7.5). It is a massive market to which to bring a better treatment.
On the back of this trial’s results, Opthea raised $45 million through a combined share placement/entitlement offer, which was hugely over-subscribed, at 93 cents a share – and included some of the world’s top specialist biotech investors.
Last month, the Phase 2b trial of OPT-302 against wet AMD (in conjunction with Lucentis) continued, with the first patients in Europe and Israel given doses. This trial will be extended into nine countries, with primary analysis of data anticipated in early 2020.
Although OPT-302 is aimed at DME as well as wet AMD – and could potentially be expanded to other eye diseases – Opthea is essentially a one-product company. But the stock at present does give investors a cheaper entry price than that at which some of the biggest biotech players in the world rushed to get onboard last year – and there has been no news that justifies this discount on fundamental grounds.
ImpediMed (IPD, 68 cents)
Market capitalisation: $257 million
Analysts’ consensus price target: $1.65 (Thomson Reuters)
ImpediMed is a highly promising medical device maker, which has a developed a range of products that use electric currents to measure a person’s fat mass, fat free mass, and fluid levels. The company’s unique BioImpedance Spectroscopy (BIS) technology uses multiple electrical frequencies to provide immediate and very accurate measurements of extracellular (internal) fluids, levels of body fat and muscle and other body composition and wellness measures.
ImpediMed originally developed its body fluid measurement device for lymphoedema (swelling), which opened up a use to help patients recovering from breast cancer – who become prone to fluid retention – and the full results from the PREVENT Trial, which started in 2014, of the BIS technology used in the prevention of breast cancer-related lymphoedema, will be very important for the company. But the technology has much broader applications: ImpediMed company built the BIS technology into a device it called SOZO, which it said was the world’s first digital health and wellness device capable of managing and monitoring a person’s fluid status, body composition and hydration in either a clinical, recreational and at-home setting.
Resembling a set of futuristic bathroom scales, SOZO measures fluid changes in the body, to give a detailed picture of health at a cellular level. The user places their hands and feet on the machine, and it gathers information on 256 measurements to work out the person’s state of health. Eight body sensors and four weight sensors measure body composition, fluid status and hydration. SOZO apps running on a smartphone or tablet then provide data to be used by individuals or doctors. The company is right in the middle of the ‘eHealth’ sweet spot, where the device can be used in hospitals, but also by an individual sending data to a doctor, as well as using it themselves simply to keep fit.
SOZO was launched in 2017 and soon made its first commercial sales in Europe and Australia – the company received CE Marking in June 2017, allowing sales in the European Union (EU) – with the first customers being large hospitals. SOZO had already been cleared by the FDA to be used in the clinical assessment of lymphedema in the US: in December, ImpediMed announced that the FDA had approved SOZO for monitoring patients with chronic heart failure (CHF). This brings SOZO into a market that is expected, according to research firm GlobalData, to balloon from US$3.2 billion in 2015 to US$11.8 billion by 2025.
ImpediMed is well funded, with a cash balance at 31 December 2017 of $42.4 million. As SOZO gains more market acceptance, and full trial results come in, the company looks well positioned for 2018.
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