Out in the wild lands beneath the S&P/ASX 200 – even beneath the market capitalisation required to be in the 500-stock All Ordinaries index – there are plenty of stock stories that are extremely interesting. In the first of a new series, here’s a couple of them.
1. Ansarada Group (AND, $1.28)
Market capitalisation: $114 million
12-month total return: –22.9%
3-year total return: n/a (listed February 2020, at $1.48)
Analysts’ consensus target price: $1.90 (Stock Doctor/Thomson Reuters, three analysts)
Ansarada is a software-as-a-service (SaaS) platform that offers subscription software built to enable the world’s top companies, advisors, organisations and governments to handle and control their information, data and processes in managing mergers and acquisition (M&A) deals and transactions, board processes, GRC (governance, risk and compliance) tenders, procurement and – an increasingly important market – ESG.
The company started out applying artificial intelligence (AI) and machine learning (ML) to automate and simplify the due diligence process for M&A deals, by creating a “virtual data room” in which authorised participants could examine and assess the relevant data. Where the process of organising and sorting huge amounts of documentation in an M&A transaction used to take weeks (even months) to accomplish, Ansarada’s software enabled it to be completed digitally, much more quickly.
That same ability has been leveraged into a variety of time-consuming data-handling tasks. For example, organisations can use Ansarada’s software to analyse large quantities of legal text and identify where new compliance is required. Ansarada is automating all aspects of business operations such as risk management, transaction monitoring, customer identification, and regulatory intelligence, to help organisations stay up-to-date on the latest legislation and requirements.
Ansarada calls its product suite an “information governance platform,” and its offering is hugely relevant in organisations’ task in collating and managing their ESG (environmental, social and governance) requirements – the software allows companies, for example, to gain full visibility over their ESG data, while also giving them insights on how to manage and present this data. ESG is a potentially massive global tailwind for Ansarada.
In FY22, revenue grew by 44%, to $48.3 million, of which international revenue was $21 million, up 38%: 57% of revenue comes from Australia and New Zealand, with 43% overseas. Average revenue per account (ARPA) was up 23%, to $1,204; customer numbers rose by 52%, to 5,251 active customers, across 180 countries; and cash flow from operations increased by 38%, to $12.6 million. Although not profitable at net profit level, Ansarada was cashflow-positive in FY22, with $22 million in net cash on the balance sheet (meaning no debt) to fund the growth strategy.
The product range is highly scalable into what it says is a global addressable market worth $52 billion. It is increasing scale in its main offshore growth markets, which are Europe, Asia and North America. Ansarada looks an exciting story, tapping into very strong growth themes such as ESG, digital efficiency, and companies’ rising risk and compliance obligations.
2. Race Oncology (RAC, $2.35)
Market capitalisation: $373 million
12-month total return: –28.6%
3-year total return: 153.1% a year
Analysts’ consensus target price:
Floated in June 2016 through a backdoor listing at 20 cents a share, Race Oncology is working on the clinical development and commercialisation of its anti-cancer drug Zantrene. The drug, formerly known as Bisantrene, disappeared almost 30 years ago through a series of corporate mergers, despite having shown excellent potential as a chemotherapy treatment for acute myeloid leukaemia (AML).
Race Oncology acquired the drug in 2016 and has steadily improved the case for Zantrene; it is currently undertaking two Phase 1/2 clinical trials in AML, but has worked hard to show that the drug has much wider potential applications, particularly in solid tumours such as breast and kidney cancers and melanoma. On the back of clinical data, Race is also positioning the small-molecule drug as a treatment that can reduce heart muscle damage caused by chemotherapeutics. Zantrene can be a low-dose, highly targeted precision oncology agent and a cardio-protective chemotherapeutic; the company’s “Three Pillars” strategy is designed to build on these broader applications.
The jargon gets tough here, but Zantrene is looming as a big player in the field of RNA-directed therapeutics, particularly what’s called RNA epitranscriptomics, where, if the body loses control of RNA epigenetics – through the over-expression of certain proteins – the result can be boosted growth of cancer (and other complex diseases). Race has identified that Zantrene is effective at inhibiting the expression of two major proteins: one is called the Fat mass and obesity-associated (FTO) protein, while another is named ALKBH5.
FTO plays a critical role in cancer development and progression, mainly because it regulates cancer stem cells and immune evasion: the over-expression of FTO has been shown to be the genetic driver of a diverse range of cancers, because it promotes the growth, self-renewal, metastasis and immune escape of cancer cells. Inhibiting FTO activity in cells has been found to kill or slow the growth of a wide range of cancers, including leukaemia, breast, lung, ovarian, gastric, brain, melanoma, pancreatic, kidney and many more. ALKBH5 has a similar role in what’s called the m6A RNA methylation pathway, which is crucial in the processes in the body by which some forms of cancer develop and grow. These proteins can have a profound impact on cancer growth, spread and resistance to treatment – Zantrene can potently inhibit these changes and thus help the body’s regulatory system. First up, Race is exploring the use of Zantrene as a new therapy for melanoma and clear cell renal cell carcinoma, or ccRCC, a type of kidney cancer; both of these cancers over-express FTO.
Last month, Race said its researchers, working with the University of Wollongong, had developed a new and improved form of Zantrene (called RC220 at present) that can be administered intra-venously, peripherally (that is, in an arm or a leg), potentially expanding its potential market. Until now, Zantrene has been delivered into the aorta, near the heart, using what is called a central line catheter, because the drug is not very soluble in blood and can crystallise and block the flow of blood in smaller veins: this procedure must be performed in a hospital setting. While this is common practice for the delivery of chemotherapy drugs in patients with leukaemia, it is not optimal for patients with solid tumours (such as breast cancer, melanoma, lung cancer, kidney cancer etc) where patients (and the treating oncologists) usually prefer IV infusion in an outpatient setting.
Race has also kicked-off a drug discovery program to build on the strength and knowledge of FTO and ALKBH5 inhibitors. Race is working with Monash University’s Monash Fragment Platform (MFP) and will own all the intellectual property developed in the project. The program will not only enable Race to develop a newer RNA-based version of Zantrene, but also other RNA-based drugs which can take the company into other disease areas beyond cancer, including diabetes. Work is also continuing at the University of Wollongong and other sites to develop additional formulations of Zantrene that can be delivered orally and/or less frequently (that is, longer-acting formulations).
At the moment, Race has Zantrene in Phase/Phase 2 trials into AML, in Israel, while a separate Phase/Phase 2 trial in extramedullary AML (in which tumours grow outside the bone marrow, similar to metastatic solid cancers) in Australia, Italy and Spain. These trials are being closely watched by researchers in the field, and the news flow could be potentially big for the stock.
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