Biotechs Surge Ahead in Regenerative Medicine and Immuno-Oncology
Sydney, May 15, 2016 AEST (ABN Newswire) - Biotech and medtech startups are not confined to the U.S. and Europe. Unmet medical needs exist all over the globe, and they create a powerful vacuum that sucks in bright minds and risk-taking capitalists. Australia is a good example: The regulatory environment supports first-in-human experimentation and entrepreneurship. Healthcare Analyst Dennis Hulme of Edison Investment Research is headquartered in Sydney, and in this interview with The Life Sciences Report, he cites a group of Australian medtech and biotech names that investors should look at very carefully.
Some interview highlights are below, with the original link available at the bottom of the page.
The Life Sciences Report (TSLR): You have followed a lot of different companies in your career as an analyst. Your current emphasis appears to be on immunotherapeutic and prophylactic agents, and on cellular therapies. Does that summarize your current focus?
Dennis Hulme(DH): That covers the bulk of my coverage, yes. But there also are a number of standard, small-molecule therapies, particularly oncology drugs, in my coverage, as well as medical devices.
I've been looking closely at an Australian company, Regeneus Ltd(
ASX:RGS). It is at an earlier stage of development than Mesoblast (ASX:MSB), but it has a human clinical trial underway in osteoarthritis with its product Progenza (allogeneic adipose-derived mesenchymal stem cells). Regeneus is pushing Progenza into early development in Japan, where it could potentially get a more rapid approval and a quicker return to investors.
TLSR: You mentioned Regeneus. Let's talk about that for a moment. There is so much going on in this company—both in human and animal health. What does your growth theory hinge on for Regeneus?
DH: The key potential driver here is the off-the-shelf stem cell product it has gotten into clinical trials relatively quickly. Regeneus is in the middle of a Phase 1 trial with Progenza in patients with osteoarthritis of the knee. We have already seen good safety data from the first cohort of subjects. We expect to see data from the second cohort around the middle of the year.
More importantly for Regeneus, it is in advanced discussions with potential manufacturing and commercialization partners in Japan. It has the advantage due to the changed, improved regenerative medicine environment in Japan. You will recall that the Japanese Diet (legislature) approved legislation back in November 2013 that gave fast-track status to stem cell and regenerative medicine companies. I'm attributing 60% of my valuation of Regeneus to Progenza. There is strong potential that a commercialization deal will be struck in Japan sometime this year, and I think that's going to be the key driver for the company.
TLSR: Regeneus has had a very strong three-month period of share price appreciation—up almost 80% in Australian dollars. It's even up from one year ago, which makes it a rarity in small-cap life sciences companies. Progenza is in a 20-patient Phase 1 trial called STEP (safety, tolerability and efficacy of Progenza) in Japan, and the company's cancer vaccine, RGSH4K, would address a huge market of many billions of dollars. What about the focus on animal health? Has that been helpful to Regeneus? Do you think the company should divest its animal health program and focus on human health?
DH: The focus on animal health has been very helpful for Regeneus, particularly in the development of its manufacturing technology. If the company hadn't been doing the animal studies initially, it would not have been able to make such rapid progress in developing its human products.
The company's CryoShot Canine product for osteoarthritis has been selling to veterinary surgeons in Australia as part of an expanded clinical trial, and Regeneus is able to generate quite good margins on relatively modest volumes. Arthritis is a big problem for dogs, just as it is in humans. There are quite sizable commercial opportunities for these veterinary products.
Regeneus currently has a development partnership with a Top 5 veterinary company, which is jointly funding an ongoing pre-pivotal study of CryoShot Canine, and that allows Regeneus to reduce its development expenditure. The animal health program is an important area for Regeneus, both as a source of income and as a great way for the company to hone its technology.
TLSR: The human and animal health programs are both in osteoarthritis and in oncology. Does the intellectual property (IP) overlap in these programs?
DH: I think the IP is distinct enough that if Regeneus chose to, it could quite readily divest the animal health business. The area where there is overlap is in the manufacturing know-how. That's where it would be a little more difficult. But as far as divestment or licensing the applications of that know-how, that would be quite feasible.
TLSR: A U.S. ticker could give the company more visibility. Is Regeneus thinking about getting a NASDAQ or over-the-counter ticker?
DH: Australian companies have had mixed experiences with NASDAQ listings. Some companies have found it's quite beneficial, but a number feel they haven't gotten a lot of benefit from it. My experience, when I talk to U.S. investors, is that they like to invest in the markets with the greatest liquidity. For most of these companies, that's going to be on the Australian stock exchange (ASX). But, obviously, I'm talking to U.S. investors who are comfortable investing in Australia, and that may be a relatively small subset.
There may be some advantage in a NASDAQ listing, but I'm just not convinced it's necessary for Regeneus. It still has the potential to attract U.S. investment with its current ASX listing.
TLSR: Regeneus was recently trading at a market cap of about AU$34 million (AU$34M). If it were trading in U.S. dollars, it might be around $27M. The market cap looks a little more enticing in Australian dollars. But can you get institutional investors into a stock with this kind of tiny market cap?
DH: It's always difficult with the very small- or micro-cap companies in early-stage development. At some stage you can do it. I have faith that the technology at Regeneus can be sufficient for partners to make an investment in the company. If it is able to do a partnering deal, that would likely be a rerating catalyst for this stock's valuation, and may well attract some institutional investors.
TLSR: Thank you very much, Dennis.
The full interview can be found on The Life Sciences Report website.
http://www.thelifesciencesreport.com/pub/na/16945
About Regeneus Ltd
Regeneus Ltd (ASX:RGS) is a Sydney-based clinical-stage regenerative medicine company using stem cell technologies to develop a portfolio of novel cell-based therapies. The regenerative therapies seek to address unmet medical needs in human health markets, focusing on neuropathic pain, including osteoarthritis and various skin conditions, with its platform technologies Progenza(TM) and Sygenus. Visit www.regeneus.com.au for more information.
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